UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
April 30, 2008
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number
000-26729
ROYALITE PETROLEUM COMPANY
INC.
(Exact name of registrant as specified in its
charter)
NEVADA
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88-0427619
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State or other jurisdiction of incorporation or
organization
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(I.R.S. Employer Identification No.)
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1200 Nueces Street
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Austin, TX
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78701
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(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number, including area code:
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(512) 478-8900
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Securities registered pursuant to Section 12(b) of the
Act:
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NONE.
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Securities registered pursuant to Section 12(g) of the
Act:
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Common Stock, $0.001 Par Value Per
Share.
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Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined by Rule 405 of the Securities Act.
Yes [
]
No [X]
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [
]
No [X]
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was
required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
[X]
No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (s229.405 of this chapter) is
not
contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information
statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company
in Rule 12b-2 of the
Exchange Act.
Large accelerated filer [ ]
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Accelerated
filer [
]
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Non-accelerated filer [ ]
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Smaller reporting company [X]
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(Do not check if a smaller reporting
company)
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Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). Yes [ ]
No [X]
State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference
to the price at
which the common equity was sold, or the average bid and asked price of such
common equity, as of the last
business day of the registrants most recently
completed second fiscal quarter:
$17,759,019 based on a price of
$0.625,
being the average of the closing bid and ask
price for the Registrants common stock as quoted on the OTC
Bulletin Board
on October 31, 2007.
Indicate the number of shares outstanding of each of the
registrants classes of common stock, as of the latest practicable
date.
As of August 6, 2008, the Registrant had 96,864,054 shares of common stock
outstanding
.
ROYALITE PETROLEUM COMPANY INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED APRIL 30,
2008
TABLE OF CONTENTS
Page 2 of 33
PART I
The information in this discussion contains forward-looking
statements. These forward-looking statements involve risks and uncertainties,
including statements regarding the Company's 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 described below, and, from time to time, in other reports the Company
files with the United States Securities and Exchange Commission (the SEC).
These factors may cause the Company's actual results to differ materially from
any forward-looking statement. The Company disclaims any obligation to publicly
update these statements, or disclose any difference between its actual results
and those reflected in these statements.
As used in this Annual Report, the terms we, us, our,
Royalite, and the Company mean Royalite Petroleum Company Inc., unless
otherwise indicated. All dollar amounts in this Annual Report are expressed in
U.S. dollars, unless otherwise indicated.
ITEM
1.
BUSINESS.
Overview
We were incorporated under the laws of the State of Nevada on
August 10, 1998.
We are engaged in the business of the acquisition and
exploration of oil and gas properties and prospects. Until recently, we were
also engaged in the operation of an international business-to-business and
government-to-business facilitation service, which combined proprietary software
with the power of the Internet to bring buyers and sellers together from around
the world for interactive trade (the Worldbid Operations). Currently, we hold
interests in certain oil and gas properties and prospects that we call the
Airport Leases, the Louisiana Leases and the Central Utah Hingeline Project, the
details of which are set out below under the heading Oil and Gas Exploration
Activities.
Recent Corporate Developments
The following corporate developments occurred since our third
fiscal quarter ended January 31, 2008:
1.
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Effective February 18, 2008, Michael Cass resigned as our
Chief Executive Officer, President and as a Director. We believe that Mr.
Casss resignation was a result of an ongoing conflict between him and the
other directors of Royalite. In particular, Mr. Cass did not have the
confidence of the Board of Directors with the result that the Board of
Directors refused to enter into transactions proposed by Mr. Cass. In
addition, the Board of Directors refused to permit Mr. Cass to pay his
management company and an investor relations consultant in priority to
other creditors of Royalite. In addition, Mr. Cass disagreed with the
course of negotiations with a potential financier. Mr. Cass also cited the
other directors lack of experience in the oil and gas industry which, in
his view, contributed to their disagreement on his proposals. The complete
text of Mr. Casss letter of resignation is attached as an exhibit to our
Current Report on Form 8-K filed on February 20, 2008.
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Effective February 18, 2008, our Board of Directors
accepted Mr. Casss resignation from all positions and appointed Mr. Logan
B. Anderson, as interim President and Chief Executive Officer.
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2.
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Effective March 31, 2008, we appointed Norris R. Harris
as our Chief Executive Officer, Chairman and a member of our Board of
Directors. Mr. Harris has considerable experience over the past 50 years
in oil and gas exploration, founding and restructuring of oil and gas
companies and in oil and gas drilling and
operations.
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3.
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On April 2, 2008, we entered into a management agreement
with Mr. Harris. Pursuant to the terms of the management agreement, Mr.
Harris is to be paid a management fee of $10,000 per month based on Mr.
Harris committing 90 hours per month on our business development in
consideration for acting as our Chairman and Chief Executive Officer and
providing management services to us. The term of the management agreement
is for a period of two years expiring at the close of business on March
31, 2010, unless otherwise terminated pursuant to the terms of the
agreement or extended by the Board.
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4.
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On April 2, 2008, we acquired a 70% net revenue interest
in the Airport Leases. See Oil and Gas Exploration Activities
below.
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5.
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On April 2, 2008, we issued 50,000,000 shares of our
common stock pursuant to May Petroleum Inc. (May) in connection with our
acquisition of the Airport Leases. As a result of the issuance of the
shares, May now holds approximately 51.6% of our issued and outstanding
common stock, resulting in a change in control.
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6.
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On April 11, 2008, we appointed D. James Fajack as our
Chief Financial Officer and a member of our Board of Directors. Logan B.
Anderson resigned as the Companys Chief Financial Officer to allow for
the appointment of Mr. Fajack in that capacity. Mr. Anderson continues to
act as a member of our Board of Directors and as our President, Secretary
and Treasurer. There was no disagreement between Mr. Anderson and us
regarding any matter relating to our operations, policies or
practices.
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7.
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On July 7, 2008, we completed the disposition of Worldbid
International Inc., our former internet business. See Worldbid
Operations below.
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8.
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On August 6, 2008, we completed a private placement of
8,660,000 shares of our common stock at a price of $0.25 per share for
gross proceeds of $2,165,000 (the Private Placement). We previously
announced the Private Placement for the sale of up to 8,000,000 shares of
our common stock. As the Private Placement was oversubscribed, our Board
of Directors approved an increase in the Private Placement of up to
8,660,000 shares of our common stock. The proceeds of the Private
Placement will be used to fund our business and for working capital
purposes. The offering was made to accredited investors pursuant to Rule
506 of Regulation D promulgated under the Securities Act of 1933 (the
Securities Act).
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9.
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On August 7, 2008, our Board of Directors approved a
private placement offering of up to 12,500,000 shares of our common stock
at a price of $0.40 per share for aggregate gross proceeds of $5,000,000
(the Private Placement Offering). The proceeds of the Private Placement
Offering will be used to fund our business and for working capital
purposes. The Private Placement Offering will be made to accredited
investors pursuant to Rule 506 of Regulation D promulgated under the
Securities Act. We may also pay commissions of up to 10% where permitted
by law to licensed brokers or investment dealers or other qualified
finders introducing purchasers of the Private Placement Offering. There is
no assurance that the Private Placement Offering will be completed on the
above terms or at all.
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OIL AND GAS EXPLORATION ACTIVITIES
We currently hold interests in three oil and gas projects that
we call the Airport Leases, the Louisiana Leases and the Central Hingeline
Project. 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.
Airport Leases
On April 2, 2008, we entered into an agreement with May
Petroleum, Inc. (May), a Texas company controlled by our Norris R. Harris, our
Chief Executive Officer, Chairman and Director, to acquire Mays interest in an
oil and gas prospect (the Prospect) in Matagorda County, Texas, including
obtaining an assignment of a Purchase and Sale Agreement (the Purchase and Sale
Agreement) to acquire a 70% net
4
revenue interest in a lease covering approximately 1,500 acres
(the Airport Lease) and obtaining and reviewing significant geophysical,
geological, title and engineering data (the Data) on the Airport Lease and an
area of mutual interest (the Area of Mutual Interest) covering 30 square miles
surrounding the Airport Lease.
Under the terms of the Agreement, May transferred and assigned
to us all its right, title and interest in the Prospect, the Purchase and Sale
Agreement and the Data in consideration of the following:
(a)
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the issuance to May of 50,000,000 shares (the Shares)
of our common stock within five (5) business days of the date of the
Agreement (which shares have been issued); and
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(b)
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the reimbursement to May within thirty (30) days of the
date of the Agreement of the $100,000 deposit paid by May under the
Purchase and Sale Agreement (which amount has been
paid).
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The Agreement also contemplates that any other property
interest acquired in the Area of Mutual Interest shall become part of the
Prospect and subject to the Agreement.
We will be responsible for making all payments and completing
all acts required under the Purchase and Sale Agreement or any other agreements
in respect of properties comprising the Prospect. Under the terms of the
Purchase and Sale Agreement, we are required to pay an additional $900,000 as
follows:
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(i)
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$400,000 on April 21, 2008, which amount has been paid;
and
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(ii)
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$500,000 on July 13, 2008, which amount has been
paid.
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Under the terms of the Airport Lease, we will be required to
commence operations to drill on or before August 1, 2008. In addition, we will
be obligated to pay an operation bonus payment of $150,000 to the landowner,
which amount has been paid. On August 1, 2008, we commenced our operations to
drill on the Airport Lease.
Louisiana Leases
We acquired a 27.5% working interest (19.8% net revenue
interest) in oil and gas leases totaling 698.62 acres in the Westlake Boudreaux
Field located in Terrebonne Parish, Louisiana shallow state waters. The first
well is expected to be drilled during the last quarter of 2008. The well will be
drilled to a depth of 13,900 feet to test the Tex. W-1, Tex. W.B, and Tex W-2
sands which are productive in other wells in the field.
Central Utah Hingeline Project
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. Our exploration and development program on this property has been
suspended pending our ability to obtain additional financing. We will be
focusing our resources on the development of the Airport Leases and the
Louisiana Leases.
Undeveloped Acreage
The following table summarizes undeveloped acreage held by us
by project name:
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Gross Acres
(1)
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Net
Acres
(2)
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Airport Leases
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2,763.92
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2,763.92
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Louisiana Leases
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698.62
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192.12
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Utah Hingeline Trend
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69,759
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67,025
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(1)
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Gross acres are calculated as the total number of acres
in which we own a working interest.
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(2)
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Net acres are calculated as gross acres multiplied by
our fractional working interest in the property.
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5
Undeveloped acres are properties on which wells have not been
developed or completed to a point that would permit the production of commercial
quantities of oil or gas, regardless of whether or not such acreage contains
proved reserves.
Drilling Activities
Our drilling program has not yet been initiated and we have
drilled no exploratory or development wells. We are expecting to commence our
drilling program in the third quarter of 2008.
Present Activities
As of the date hereof, we do not have any wells in the process
of drilling or any other field operations in progress of material significance.
Competitors in the Oil and Gas Exploration Business
Oil and gas exploration is a highly competitive industry. We
compete with other oil and gas exploration companies for the acquisition of new
properties, the services of consultants and the hiring of exploration and
drilling equipment. In addition, we compete with other junior oil and gas
exploration companies for financing. Many of our competitors have greater
financial, staffing and technical resources than we do. Accordingly, these
competitors may be able to spend greater amounts than us on the acquisition of
oil and gas exploration rights and on acquiring limitedly available consultants
and equipment, placing us at a competitive disadvantage. These competitive
disadvantages could adversely impact our ability to obtain additional financing
and thus our ability to continue to explore for economically viable oil and gas
deposits.
Environmental Matters Related to Our Oil and Gas Exploration
Activities
The oil and gas industry is subject to heavy regulation at the
federal, state and local levels. These regulations include regulations:
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requiring permits for the drilling of wells,
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requiring the posting of bonds for drilling and/or operating wells,
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governing the location of wells,
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governing the methods used to drill wells,
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governing surface area usage and the restoration of the land upon which
wells are drilled,
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governing the plugging and abandoning of wells and the disposal of waste
materials used in or generated in drilling operations, and
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setting certain environmental conservation restrictions.
The cost of complying with these regulations is high and these
regulations can have the effect of limiting our ability to engage in oil and gas
exploration activities and when or where those activities take place. Some of
these laws and regulations, including the federal Comprehensive Environmental
Response, Compensation and Liability Act (also known as CERCLA or the
Superfund law), may impose strict liability for environmental damage caused by
hazardous wastes released during oil and gas exploration and production
activities. As a result, we could become liable for the costs of environmental
cleanups, environmental damages and, in some cases, consequential damages,
regardless of whether or not there was any negligence or fault on our part. In
some cases, regulations may also require oil and gas production levels to be
kept at a level that is lower than what would be economically optimal. In other
cases, we may be completely prohibited from drilling exploratory or production
wells in certain environmentally sensitive areas even if we believe that there
are economically viable oil and gas deposits in those areas. If we violate any
of these environmental laws or regulations, we could become subject to heavy
fines or sanctions and/or be required to incur significant costs for
environmental clean up and remediation. In addition, neighboring landowners and
other third parties could file claims for personal injury claims or for damage
to property or natural resources caused by oil and gas exploration activities.
We believe that we are currently in substantial compliance with
all applicable environmental laws and regulations. To date, we have not been
required to expend substantial amounts of money in complying with
6
these laws and regulations and we anticipate that the costs
associated with future compliance will not have a materially adverse effect on
our financial position. However, the laws and regulations governing the oil and
gas industry are subject to constant change as environmental issues relating
this industry remain highly politicized. Proposals and proceedings affecting oil
and gas exploration activities are periodically presented to Congress and
federal regulatory bodies as well as to state legislative and regulatory bodies.
We cannot predict when or whether such proposals may become effective. There is
no assurance that the future regulatory environment for oil and gas activities
will be consistent with the current regulatory environment. We will need to
constantly monitor developments in environmental and other laws and regulations
applicable to oil and gas activities in order to ensure compliance. There is no
assurance that we will be able to meet the costs associated with regulatory
compliance in the future.
WORLDBID OPERATIONS
On July 7, 2008, we completed the disposition of our Worldbid
Operations. The disposition was completed pursuant to the terms and conditions
of the Share Purchase Agreement dated June 5, 2008 (the Share Purchase
Agreement) among the Company, Marktech Acquisition Corp. (Marktech) and
Worldbid International Inc. (Worldbid). Under the terms of the Share Purchase
Agreement, we sold all of the shares of Worldbid and all Worldbid related
business assets to Marktech in consideration of $50,000 and the assumption of
approximately $93,000 in liabilities. The cash portion of the purchase price
consisted of $25,000 in cash and a non-interest bearing promissory note in the
amount of $25,000 in favor of the Company due on August 6, 2008. As additional
consideration, we assigned to Marktech its right and interest in the
intercompany loan between the Company and Worldbid. In addition, Marktech will
indemnify us from any liabilities or damages arising out of the liabilities of
Worldbid and the liabilities assumed by Marktech. We disposed of the subsidiary
in order to concentrate its efforts on its core oil and gas business
EMPLOYEES
We currently do not have any employees. We have a total of five
full-time equivalent contract personnel and four part-time contract personnel.
All staff, including our officers and directors, are retained on a contract
basis.
Our future performance depends upon the continued contributions
of members of senior management and other key personnel. Competition for
attracting and retaining personnel in the industry is intense, and we need to be
successful in attracting qualified employees in order for our business to
succeed in the future. If one or more of our key personnel leaves and/or joins
or forms a competitor, this could have a harmful effect on our business.
ITEM
1A. RISK
FACTORS.
The following are some of the important factors that could
affect our financial performance or could cause actual results to differ
materially from estimates contained in our forward-looking statements. We may
encounter risks in addition to those described below. Additional risks and
uncertainties not currently known to us, or that we currently deem to be
immaterial, may also impair or adversely affect our business, financial
condition or results of operation.
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 and satisfy our existing creditors. In addition, we may not be
able to make the required rental payments on our existing oil and gas
7
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 $1,553,516 during the year ended April 30,
2008 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.
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 executive officers, Norris R. Harris, Logan B. Anderson
and D. James Fajack. The loss of the services of our executive officers 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 future offerings of our equity securities in
the future, in which case investors 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,
shareholders 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
8
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.
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contains a description of the nature and level of risk in
the market for penny stocks in both public offerings and secondary
trading;
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2.
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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;
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3.
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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;
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4.
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contains a toll-free telephone number for inquiries on
disciplinary actions;
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5.
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defines significant terms in the disclosure document or
in the conduct of trading in penny stocks; and
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6.
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contains such other information and is in such form,
including language, type, size and format, as the SEC shall require by
rule or regulation.
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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.
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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;
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2.
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availability and costs of financing;
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3.
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ongoing costs of production; and
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4.
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environmental compliance regulations and
restraints.
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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,
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including regulations relating to allowable drilling,
production, importing and exporting of oil and gas deposits, and environmental
protection.
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. 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.
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
10
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 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)
|
weather conditions in the United States and
elsewhere;
|
|
(b)
|
economic conditions, including demand for petroleum-based
products, in the United States and elsewhere;
|
|
(c)
|
actions by OPEC, the Organization of Petroleum Exporting
Countries;
|
|
(d)
|
political instability in the Middle East and other major
oil and gas producing regions;
|
|
(e)
|
governmental regulations, both domestic and
foreign;
|
|
(f)
|
domestic and foreign tax policy;
|
|
(g)
|
the pace adopted by foreign governments for the
exploration, development, and production of their national
reserves;
|
|
(h)
|
the price of foreign imports of oil and gas;
|
|
(i)
|
the cost of exploring for, producing and delivering oil
and gas; the discovery rate of new oil and gas reserves;
|
|
(j)
|
the rate of decline of existing and new oil and gas
reserves;
|
|
(k)
|
available pipeline and other oil and gas transportation
capacity;
|
|
(l)
|
the ability of oil and gas companies to raise
capital;
|
|
(m)
|
the overall supply and demand for oil and gas;
and
|
|
(n)
|
the availability of alternate fuel
sources.
|
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 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.
11
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.
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 Annual 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.
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 prospective production.
12
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
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.
ITEM
2.
PROPERTIES.
Our corporate headquarters are located at 1200 Nueces Street,
Austin, TX 78701, where our principal executive functions are carried out. The
space consists of approximately 3,000 square feet at a cost of $2,750 per month.
In addition to our office headquarters, we own an interest in
a number of oil and gas leases in Texas, Louisiana and South-Central Utah. A
description of these oil and gas leases is provided above under Oil and
Gas Exploration Activities.
ITEM
3.
LEGAL PROCEEDINGS.
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 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 are defending the action and, at the same time, seeking to negotiate a settlement to the claim.
13
ITEM
4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to our security holders during the
fourth quarter of our fiscal year ended April 30, 2008.
14
PART II
ITEM 5.
|
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES.
|
MARKET INFORMATION
The principal market for our shares is currently the OTC
Bulletin Board. For the period from July 13, 2000 to September 19, 2005, our
shares were traded on the OTCBB under the symbol WBID. Effective on September
19, 2005, following our one-for-twenty-five (1:25) reverse stock split, our
symbol was changed to WBDC. Effective on March 5, 2007, following our name
change to Royalite Petroleum Company Inc., our symbol changed to RYPE.
The high and the low prices for our shares for each quarter of
our last two fiscal years of actual trading were:
Fiscal Quarter
Ended
|
High
|
Low
|
April 30, 2008
|
$0.50
|
$0.135
|
January 31, 2008
|
$0.62
|
$0.12
|
October 31, 2007
|
$1.10
|
$0.35
|
July 31, 2007
|
$2.05
|
$0.75
|
April 30, 2007
|
$4.45
|
$1.53
|
January 31, 2007
|
$3.90
|
$2.235
|
October 31, 2006
|
$3.35
|
$1.53
|
July 31, 2006
|
$1.90
|
$0.30
|
The high and low bid price information provided above was
obtained from the OTC Bulletin Board. The market quotations provided reflect
inter-dealer prices, without retail mark-up, markdown or commission and may not
represent actual transactions.
PENNY STOCK RULES
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 system. The penny
stock rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from those rules, to deliver a standardized risk disclosure
document prepared by the SEC, which: (a) contains a description of the nature
and level of risk in the market for penny stocks in both public offerings and
secondary trading; (b) 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 of such duties or other requirements of securities laws;
(c) contains a brief, clear, narrative description of a dealer market, including
bid and ask prices for penny stocks and significance of the spread between the
bid and ask price; (d) contains a toll-free telephone number for inquiries on
disciplinary actions; (e) defines significant terms in the disclosure document
or in the conduct of trading in penny stocks; and (f) contains such other
information and in such form as the SEC shall require by rule or regulation. The
broker-dealer also must, prior to effecting any transaction in a penny stock,
provide 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) 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 that is not otherwise
exempt from those rules, the broker-dealer must: (a) make a special written
determination that the penny stock is a suitable investment for the purchaser
and (b) receive from the purchaser his or her written acknowledgement of receipt
of the determination and a written agreement to the transaction.
15
These disclosure requirements may have the effect of reducing
the trading activity in the secondary market for our stock and therefore
stockholders may have difficulty selling those securities.
REGISTERED HOLDERS OF OUR COMMON STOCK
Our authorized capital consists of 500,000,000 shares of common
stock, par value $0.001 per share, and 100,000,000 shares of preferred stock,
par value $0.001 per share. As of August 6, 2008, there were 170 registered
holders of our common stock. We believe that a large number of stockholders hold
stock on deposit with their brokers or investment bankers registered in the name
of stock depositories.
DIVIDENDS
We have not declared any dividends on our common stock since
our inception. There are no dividend restrictions that limit our ability to pay
dividends on our common stock in our Articles of Incorporation or bylaws.
Chapter 78 of the Nevada Revised Statutes (the NRS), does provide certain
limitations on our ability to declare dividends. Section 78.288 of Chapter 78 of
the NRS prohibits us from declaring dividends where, after giving effect to the
distribution of the dividend:
(a)
|
we would not be able to pay our debts as they become due
in the usual course of business; or
|
|
|
(b)
|
except as may be allowed by our Articles of
Incorporation, our total assets would be less than the sum of our total
liabilities plus the amount that would be needed, if we were to be
dissolved at the time of the distribution, to satisfy the preferential
rights upon dissolution of stockholders who may have preferential rights
and whose preferential rights are superior to those receiving the
distribution.
|
We have neither declared nor paid any cash dividends on our
capital stock and do not anticipate paying cash dividends in the foreseeable
future. Our current policy is to retain any earnings in order to finance the
expansion of our operations. Our board of directors will determine future
declaration and payment of dividends, if any, in light of the then-current
conditions they deem relevant and in accordance with the Nevada Revised
Statutes.
RECENT SALES OF UNREGISTERED SECURITIES
All unregistered sales of our equity securities made during the
year ended April 30, 2008 have been reported by us in our Quarterly Reports or
in our Current Reports filed with the SEC during the year.
ITEM
7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
PLAN OF OPERATION
Our plan of operation over the next twelve months is to
continue with the exploration and development of our oil and gas operations. We
have suspended our exploration program on the Central Utah Hingeline Project in
order to focus our resources on the exploration and development of the Airport
Leases and Louisiana Leases.
Airport Leases
We commenced the preliminary work to our drilling operations on
the Airport Leases on August 1, 2008. Subject to our ability to obtain
sufficient financing, we anticipate that we will commence drilling on the
Airport Leases in the third quarter of 2008. Our drilling program on the Airport
Leases is expected to cost between $100,000 to $16,000,000 and will be dependent
upon our ability to obtain substantial financing.
16
Louisiana Leases
Our plan of operation for our Louisiana Leases is to commence
drilling in the last quarter of 2008. The well will be drilled to a depth of
13,900 feet to test the Tex. W-1, Tex. W.B, and Tex W-2 sands which are
productive in other wells in the field. The well is projected to cost $6,453,300
to drill and complete with our portion estimated at $1,774,657.
We do not currently have, and are not expected to 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 operations will be dependent upon our ability
to obtain additional financing.
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.
Summary of Year End Results
|
|
|
|
|
|
|
|
|
Year Ended April 30,
|
Percentage
|
|
2008
|
2007
|
Increase / (Decrease)
|
Revenue
|
$-
|
$-
|
n/a
|
Expenses
|
(1,420,687)
|
(3,385,677)
|
(58.0)%
|
Other Items
|
(132,829)
|
(766,773)
|
(82.7)%
|
Net Loss
|
$(1,553,516)
|
$(4,160,057)
|
(62.7)%
|
Revenues
We have not earned any revenues from our oil and gas activities
to date. We do not anticipate earning revenue from our oil and gas exploration
activities in the near future.
Expenses
The major components of our expenses for the year are outlined
in the table below:
|
|
|
Percentage
|
|
Year Ended
|
Year Ended
|
Increase /
|
|
April 30, 2008
|
April 30, 2007
|
(Decrease)
|
Oil and Gas Exploration
Expenses
|
$586,010
|
$2,471,752
|
(76.3)%
|
Selling, General and Administrative
|
820,696
|
910,967
|
(9.9)%
|
Expenses
|
|
|
|
Depreciation and amortization
|
3,980
|
2,958
|
34.6%
|
Loss on Disposal of Assets
|
10,001
|
-
|
n/a
|
Total Expenses
|
$1,420,687
|
$3,385,677
|
(58.0)%
|
The decrease of our oil and gas exploration expenses for the
year ended April 30, 2008 is due to the fact that we suspended our oil and gas
exploration and development activities on our Central Utah Hingeline Project..
17
Selling and administrative expenses for the year ended April
30, 2008 primarily relate to remuneration paid to our officers and directors;
and accounting and legal fees in connection with our ongoing filing requirements
under the Exchange Act.
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 on our Airport Leases and Louisiana Leases.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
|
|
|
|
Year
Ended April 30
|
|
2008
|
2007
|
Net Cash used in Operating Activities
|
$(1,211,291)
|
$(206,641)
|
Net Cash used in Investing Activities
|
(446,729)
|
(349,968)
|
Net Cash from Financing Activities
|
390,055
|
1,449,706
|
Net Increase (Decrease) in Cash During Period
|
$(1,267,965)
|
$893,097
|
Working Capital
|
|
|
|
|
|
|
Percentage
|
|
At
April 30, 2008
|
At
April 30, 2007
|
Increase / (Decrease)
|
Current Assets
|
$109,307
|
$1,480,413
|
(92.6)%
|
Current Liabilities
|
(1,794,750)
|
(1,290,574)
|
39.1%
|
Working Capital Surplus
(Deficit)
|
$(1,685,443)
|
$189,839
|
(987.8)%
|
As of April 30, 2008, we had cash on hand of $43,469 and a
working capital deficit of $1685,443. The decrease in our working capital during
our year ended April 30, 2008 from the comparable period ended April 30, 2007 is
primarily attributable to: (i) from the fact that we had no revenue from our oil
and gas activities during the year ended April 30, 2008; and (ii) our sole
source of financing was in the form of short term loans.
During the year ended April 30, 2008, we received loans
totaling $25,070 from an executive officer and director. The loans bear interest
at a rate of 10% per annum, are unsecured and due on demand.
Subsequent to our year ended April 30, 2008, we completed the
sale of 8,660,000 shares of our common stock for total gross proceeds of
$2,165,000. The proceeds of the Private Placement will be used to fund our
business and for working capital purposes.
Future Financings
On August 7, 2008, our Board of Directors approved a private
placement offering of up to 12,500,000 shares of our common stock at a price of
$0.40 per share for aggregate gross proceeds of $5,000,000 (the Private
Placement Offering). The proceeds of the Private Placement Offering will be
used to fund our business and for working capital purposes. The Private
Placement Offering will be made to accredited investors pursuant to Rule 506 of
Regulation D promulgated under the Securities Act. We may also pay commissions
of up to 10% where permitted by law to licensed brokers or investment dealers or
other qualified finders introducing purchasers of the Private Placement
Offering. There is no assurance that the Private Placement Offering will be
completed on the above terms or at all.
Historically, we have been dependent on sales of equity
securities, issuances of convertible debt securities, and related party loans as
sources of financing. There are no assurances 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.
18
OFF-BALANCE SHEET ARRANGEMENTS
We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to stockholders.
CRITICAL ACCOUNTING POLICIES
We have identified a certain accounting policy, described
below, that is most important to the portrayal of our current financial
condition and results of operations. Our significant accounting policies are
disclosed in Note 2 to the audited financial statements included in this Annual
Report.
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.
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, 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.
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
19
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.
20
ITEM
8.
FINANCIAL STATEMENTS AND SUPLEMENTARY DATA.
1.
|
Report of Independent Registered Public Accounting
Firm;
|
|
|
|
2.
|
Audited Financial Statements for the Years Ended April
30, 2008 and 2007, including:
|
|
|
|
|
a.
|
Consolidated Balance Sheets at April 30, 2008 and April
30, 2007;
|
|
|
|
|
b.
|
Consolidated Statements of Operations for the period from
December 2, 2005 (date of Inception) to April 30, 2008, for the year ended
April 30, 2008 and for the year ended April 30, 2007;
|
|
|
|
|
c.
|
Consolidated Statements of Comprehensive Loss for the
period from December 2, 2005 (date of Inception) to April 30, 2008, for
the year ended April 30, 2008 and for the year ended April 30,
2007;
|
|
|
|
|
d.
|
Consolidated Statements of Cash Flows for the period from
December 2, 2005 (date of Inception) to April 30, 2008, for the year ended
April 30, 2008 and for the year ended April 30, 2007;
|
|
|
|
|
e.
|
Consolidated Statement of Stockholders Equity for the
period from December 2, 2005 (date of inception) to April 30, 2008;
and
|
|
|
|
|
f.
|
Notes to the Consolidated Financial
Statements.
|
21
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
FINANCIAL STATEMENTS
April 30, 2008
(Stated in U.S. Dollars)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Royalite Petroleum Company, Inc.
Henderson, Nevada
We have audited the accompanying consolidated balance sheet of Royalite Petroleum Company, Inc., an exploration stage company, as of April 30, 2008 and April 30, 2007, and the related consolidated statements of operations, comprehensive loss, cash flows, and changes in stockholders’ equity for the years then ended, and for the period December 2, 2005 (date of inception) to April 30, 2008. These financial statements are the responsibility of Royalite Petroleum Company, Inc.’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Royalite Petroleum Company, Inc., an exploration stage company, as of April 30, 2008 and April 30, 2007, and the results of its operations and cash flows for the years then ended, and for the period December 2, 2005 (date of inception) to April 30, 2008, in conformity with accounting principles generally accepted in The United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, which raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are described in Note 1. Absent the successful completion of one of these alternatives, the Company’s operating results will increasingly become uncertain. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Sarna & Company
Sarna & Company,
Certified Public Accountants
Westlake Village, California
August 11, 2008
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(Stated in U.S. Dollars)
|
|
APRIL 30
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash and
cash equivalents
|
$
|
43,469
|
|
$
|
1,311,434
|
|
Prepaid expenses
|
|
23,959
|
|
|
110,332
|
|
Other assets
|
|
-
|
|
|
1,079
|
|
Assets held for discontinued
operations (Note 4)
|
|
41,879
|
|
|
57,568
|
|
|
|
109,307
|
|
|
1,480,413
|
|
|
|
|
|
|
|
|
Property And Equipment
(Note
5)
|
|
-
|
|
|
13,781
|
|
License Rights
(Note 6)
|
|
2,599
|
|
|
2,799
|
|
Deposit on Unproven Oil and
Gas Property
Related
|
|
|
|
|
|
|
Party (Note 7)
|
|
12,700,000
|
|
|
-
|
|
Unproven Oil and Gas Properties
(Note 8)
|
|
2,520,413
|
|
|
2,413,684
|
|
Deposits
|
|
60,000
|
|
|
28,500
|
|
|
|
|
|
|
|
|
|
$
|
15
,392,319
|
|
$
|
3,939,177
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities
|
$
|
1,280,122
|
|
$
|
1,160,990
|
|
Loans payable
Related Parties (Note 9)
|
|
46,750
|
|
|
21,680
|
|
Share subscriptions received
(Note 10)
|
|
364,985
|
|
|
-
|
|
Notes payable
(Note 11)
|
|
20,000
|
|
|
20,000
|
|
Liabilities held for discontinued
operations (Note 4)
|
|
82,893
|
|
|
87,904
|
|
|
|
1,794,750
|
|
|
1,290,574
|
|
STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Stock
(Note 11)
|
|
|
|
|
|
|
Authorized:
|
|
|
|
|
|
|
500,000,000 common shares, par value $0.001
|
|
|
|
|
|
|
100,000,000 preferred shares, par value $0.001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued:
|
|
|
|
|
|
|
88,107,270 common shares (April 30, 2007
|
|
|
|
|
|
|
36,907,270)
|
|
88,207
|
|
|
36,907
|
|
|
|
|
|
|
|
|
Additional Paid-In Capital
|
|
19,076,223
|
|
|
6,618,523
|
|
Warrants
|
|
351,100
|
|
|
351,100
|
|
Accumulated Deficit During Exploration Stage
|
|
(5,909,658
|
)
|
|
(4,356,142
|
)
|
Accumulated Other Comprehensive Loss
|
|
(8,303
|
)
|
|
(1,785
|
)
|
|
|
13,597,569
|
|
|
2,648,603
|
|
|
|
|
|
|
|
|
|
$
|
15,392,319
|
|
$
|
3,939,177
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 13)
|
|
|
|
|
|
|
Subsequent Event (Note16)
|
|
|
|
|
|
|
See Accompanying Notes to Financial Statements
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in U.S. Dollars)
|
|
|
|
|
|
|
|
PERIOD
|
|
|
|
|
|
|
|
|
|
FROM
|
|
|
|
|
|
|
|
|
|
INCEPTION
|
|
|
|
|
|
|
|
|
|
DECEMBER 2,
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
YEARS ENDED
|
|
|
TO
|
|
|
|
APRIL 30
|
|
|
APRIL 30
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
Oil and gas exploration expenses
|
|
586,010
|
|
|
2,471,752
|
|
|
3,091,852
|
|
Selling , general and administrative
expenses
|
|
820,696
|
|
|
910,967
|
|
|
1,893,645
|
|
Depreciation and amortization
|
|
3,980
|
|
|
2,958
|
|
|
6,951
|
|
Loss on disposal of assets
|
|
10,001
|
|
|
-
|
|
|
10,001
|
|
|
|
1,420,687
|
|
|
3,385,677
|
|
|
5,002,449
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
(1,420,687
|
)
|
|
(3,385,677
|
)
|
|
(5,002,449
|
)
|
|
|
|
|
|
|
|
|
|
|
Other Expenses
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(3,301
|
)
|
|
(861
|
)
|
|
(4,162
|
)
|
Fair value of discount on private placement
|
|
-
|
|
|
(763,800
|
)
|
|
(763,800
|
)
|
Oil and gas property write
offs
|
|
(92,000
|
)
|
|
-
|
|
|
(92,000
|
)
|
Loss on discontinued operations
|
|
(37,528
|
)
|
|
(9,719
|
)
|
|
(47,247
|
)
|
|
|
(132,829
|
)
|
|
(766,773
|
)
|
|
(907,209
|
)
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
$
|
(1,553,516
|
)
|
$
|
(4,160,057
|
)
|
$
|
(5,909,658
|
)
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss per Common Share
|
$
|
(0.04
|
)
|
$
|
(0.15
|
)
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Common Shares
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
40,960,275
|
|
|
26,957,223
|
|
|
|
|
See Accompanying Notes to Financial Statements
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Stated in U.S. Dollars)
|
|
|
|
|
|
|
|
PERIOD
|
|
|
|
|
|
|
|
|
|
FROM
|
|
|
|
|
|
|
|
|
|
INCEPTION
|
|
|
|
|
|
|
|
|
|
DECEMBER 2,
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
YEARS ENDED
|
|
|
TO
|
|
|
|
APRIL 30
|
|
|
APRIL 30
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
$
|
(1,553,516
|
)
|
$
|
(4,160,057
|
)
|
$
|
(5,909,658
|
)
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
(6,518
|
)
|
|
(1,785
|
)
|
|
(8,303
|
)
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Loss
|
$
|
(1,560,034
|
)
|
$
|
(4,161,842
|
)
|
$
|
(5,917,961
|
)
|
See Accompanying Notes to Financial Statements
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in U.S. Dollars)
|
|
|
|
|
|
|
|
PERIOD FROM
|
|
|
|
|
|
|
|
|
|
INCEPTION
|
|
|
|
|
|
|
|
|
|
DECEMBER 2,
|
|
|
|
YEARS ENDED
|
|
|
2005
|
|
|
|
APRIL 30
|
|
|
TO
|
|
|
|
2008
|
|
|
2007
|
|
|
APRIL 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(1,553,516
|
)
$
|
|
(4,160,057
|
)
|
$
|
(5,909,658
|
)
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to Net
|
|
|
|
|
|
|
|
|
|
Cash Used in Operating Activities
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
3,980
|
|
|
2,958
|
|
|
6,951
|
|
Fair value of discount on private
placement
|
|
-
|
|
|
763,800
|
|
|
763,800
|
|
Fair value of stock
issued pursuant to
|
|
|
|
|
|
|
|
|
|
investor relations
contracts
|
|
47,500
|
|
|
-
|
|
|
47,500
|
|
Loss on disposal
of property and
|
|
|
|
|
|
|
|
|
|
equipment
|
|
10,001
|
|
|
-
|
|
|
10,001
|
|
Write-off of oil
and gas property exploration
|
|
|
|
|
|
|
|
|
|
expenditures
|
|
-
|
|
|
2,250,118
|
|
|
2,250,118
|
|
Write off of oil
and gas property acquisition
|
|
|
|
|
|
|
|
|
|
costs
|
|
92,000
|
|
|
-
|
|
|
92,000
|
|
Changes in Operating Assets and Liabilities
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
95,873
|
|
|
(110,332
|
)
|
|
(14,459
|
)
|
Other assets
|
|
1,079
|
|
|
(1,079
|
)
|
|
-
|
|
Deposits
|
|
(31,500
|
)
|
|
(25,000
|
)
|
|
(60,000
|
)
|
Assets held for
discontinued operations
|
|
15,689
|
|
|
(15,379
|
)
|
|
310
|
|
Accounts payable and accrued liabilities
|
|
119,132
|
|
|
1,081,620
|
|
|
1,226,177
|
|
Liabilities held
for discontinued operations
|
|
(11,529
|
)
|
|
6,710
|
|
|
(4,819
|
)
|
Net Cash Used in Operating Activities
|
|
(1,211,291
|
)
|
|
(206,641
|
)
|
|
(1,592,079
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
|
Cash paid on deposit for unproven
oil
|
|
|
|
|
|
|
|
|
|
property related party
|
|
(340,000
|
)
|
|
-
|
|
|
(340,000
|
)
|
Cash paid on unproven oil properties
|
|
(106,729
|
)
|
|
(4,375,292
|
)
|
|
(4,770,531
|
)
|
Cash acquired on reverse merger
|
|
-
|
|
|
4,038,375
|
|
|
4,038,375
|
|
Acquisition of property and equipment
|
|
-
|
|
|
(13,051
|
)
|
|
(16,551
|
)
|
|
|
(446,729
|
)
|
|
(349,968
|
)
|
|
(1,088,707
|
)
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
|
Payments on notes payable- related party
|
|
-
|
|
|
(98,294
|
)
|
|
(98,294
|
)
|
Proceeds from Stock issuances
|
|
-
|
|
|
1,548,000
|
|
|
2,334,200
|
|
Proceeds from share subscriptions received
|
|
364,985
|
|
|
-
|
|
|
364,985
|
|
Proceeds from loans payable -
related parties
|
|
25,070
|
|
|
-
|
|
|
123,364
|
|
|
|
390,055
|
|
|
1,449,706
|
|
|
2,724,255
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash and Cash
|
|
|
|
|
|
|
|
|
|
Equivalents
|
|
(1,267,965
|
)
|
|
893,097
|
|
|
43,469
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, beginning of
|
|
|
|
|
|
|
|
|
|
Period
|
|
1,311,434
|
|
|
418,337
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, end of Period
|
|
|
|
|
|
|
|
|
|
|
$
|
43,469
$
|
|
|
1,311,434
|
|
$
|
43,469
|
|
(Continued)
See Accompanying Notes to Financial Statements
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in U.S. Dollars)
|
|
|
|
|
|
|
|
PERIOD FROM
|
|
|
|
|
|
|
|
|
|
INCEPTION
|
|
|
|
|
|
|
|
|
|
DECEMBER 2
|
|
|
|
YEARS ENDED
|
|
|
2005
|
|
|
|
APRIL 30
|
|
|
TO
|
|
|
|
2008
|
|
|
2007
|
|
|
APRIL 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes paid
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
$
|
-
|
|
$
|
2,973
|
|
$
|
2,973
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary disclosure for Non-Cash
|
|
|
|
|
|
|
|
|
|
Investing and Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued on acquisition of Worldbids
|
|
|
|
|
|
|
|
|
|
business
|
$
|
-
|
|
$
|
3,905,530
|
|
$
|
3,905,530
|
|
Stock issued as deposit on Oil and Gas
|
|
|
|
|
|
|
|
|
|
property - Related
Party
|
$
|
12,000,000
|
|
$
|
-
|
|
$
|
12,000,000
|
|
Stock issued for acquisition of Oil and
|
|
|
|
|
|
|
|
|
|
Gas properties
|
$
|
92,000
|
|
$
|
-
|
|
$
|
92,000
|
|
Stock issued as finders fees for Oil and
|
|
|
|
|
|
|
|
|
|
Gas property
|
$
|
360,000
|
|
$
|
-
|
|
$
|
360,000
|
|
See Accompanying Notes to Financial Statements
ROYALITE PETROLEUM COMPANY INC
.
(An
Exploration
Stage
Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(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
ROYALITE PETROLEUM COMPANY INC.
(An
Exploration
Stage
Company)
CONSOLIDATEDSTATEMENT OF STOCKHOLDERSEQUITY
(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 properties
|
50,200,000
|
|
|
200
|
|
|
91,800
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
92,000
|
|
Common shares issued for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
deposit on Oil and Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
property
|
50,000,000
|
|
|
50,000
|
|
|
11,950,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
12,000,000
|
|
Common shares issued as
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
finders fees for Oil and Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
properties
|
1,000,000
|
|
|
1,000
|
|
|
359,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
360,000
|
|
Common shares issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
pursuant to investor relations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
contracts
|
100,000
|
|
|
100
|
|
|
56,900
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
57,000
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustment
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(6,518
|
)
|
|
(6,518
|
)
|
Net Loss
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,553,516
|
)
|
|
-
|
|
|
(1,553,516
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance April 30, 2008
|
88,107,270
|
|
$
|
88,207
|
|
$
|
19,076,223
|
|
$
|
351,100
|
|
$
|
(5,909,658
|
)
|
$
|
(8,303
|
)
|
$
|
13,597,569
|
|
See Accompanying Notes to Financial Statements
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
APRIL 30, 2008
(Stated in U.S.
Dollars)
1.
|
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 April
30, 2008, the Company owned interests in oil and gas properties located
within the State of Utah. The Company is exploring various oil and gas
properties at this time.
|
|
|
|
|
|
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).
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
1.
|
OPERATIONS
(Continued)
|
|
|
|
|
b)
|
History (Continued)
|
|
|
|
|
|
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.
|
|
|
|
|
|
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 April 30, 2008, the Company incurred cumulative net losses of approximately $5,909,658 from operations and has a negative working capital of $1,685,443. 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.
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
|
|
|
a)
|
Basis of Presentation
|
|
|
|
|
|
The financial statements include the operations of the Company and its wholly-owned subsidiary, Worldbid International Inc., a Company 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.
|
|
|
|
|
b)
|
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.
|
|
|
|
|
c)
|
Cash and Cash Equivalents
|
|
|
|
|
|
The Company considers all investments with an original maturity of three months or less to be a cash equivalent.
|
|
|
|
|
d)
|
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.
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
2.
|
SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
d)
|
Oil and Gas Exploration Activity (Continued)
|
|
|
|
|
|
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
|
|
|
|
|
e)
|
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.
|
|
|
|
|
f)
|
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.
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
2.
|
SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
|
g)
|
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.
|
|
|
|
|
|
h)
|
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.
|
|
|
|
|
|
i)
|
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.
|
|
|
|
|
|
j)
|
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.
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
2.
|
SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
k)
|
Comprehensive Income (Loss)
|
|
|
|
|
|
The Companys accumulated other comprehensive loss consists of the accumulated foreign currency translation adjustments.
|
|
|
|
|
l)
|
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.
|
|
|
|
|
m)
|
Research and Development
|
|
|
|
|
|
All research and development expenditures during the period have been charged to operations.
|
|
|
|
|
n)
|
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.
|
|
|
|
|
o)
|
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.
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
2.
|
SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
p)
|
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.
|
|
|
|
|
q)
|
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.
|
|
|
|
|
r)
|
Reclassification
|
|
|
|
|
|
Certain reclassifications have been made to the prior years financial statements to conform to the current years presentation
|
|
|
|
|
s)
|
New Accounting Pronouncements
|
|
|
|
|
|
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.
|
|
|
|
|
|
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.
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
2.
|
SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
s)
|
New Accounting Pronouncements (Continued)
|
|
|
|
|
|
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.
|
|
|
|
|
|
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.
|
|
|
|
|
|
In December 2007, the FASB issued SFAS No. 141 (Revised) Business Combinations. SFAS 141 (Revised) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and
determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The guidance will become effective for the fiscal year commencing May 31, 2009. The
management is in the process of evaluating the impact SFAS 141 (Revised) will have on the Companys financial statements upon adoption.
|
|
|
|
|
|
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in consolidated Financial Statements - an Amendment of ARB No. 51." This statement requires that noncontrolling or minority interests in subsidiaries be
presented in the consolidated statement of financial position within equity, but separate from the parents' equity, and that the amount of the consolidated net income attributable to the parent and to the noncontrolling interest be clearly
identified and presented on the face of the consolidated statement of income.
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
2.
|
SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
s)
|
New Accounting Pronouncements (Continued)
|
|
|
|
|
|
SFAS No. 160 is effective for the fiscal years beginning
on or after December 15, 2008. Currently the Company does not anticipate
that this statement will have an impact on its financial
statements.
|
|
|
|
|
|
In March 2008, the FASB issued SFAS No.161, Disclosures
about Derivative Instruments and Hedging Activities, an amendment of FASB
Statement No.133, which requires additional disclosures about the
objectives of the derivative instruments and hedging activities, the
method of accounting for such instruments under SFAS No.133 and its
related interpretations, and a tabular disclosure of the effects of such
instruments and related hedged items on our financial position, financial
performance, and cash flows. SFAS No.161 is effective for financial
statements issued for fiscal years and interim periods beginning after
November 15, 2008, We are currently assessing the potential impact that
adoption of SFAS No.161 may have on our financial statements.
|
|
|
|
|
|
In May 2008, the FASB issued SFAS No.163 Accounting for
Financial Guarantee Insurance Contractsan interpretation of FASB
Statement No. 60, which requires that an insurance enterprise recognize a
claim liability prior to an event of default (insured event) when there is
evidence that credit deterioration has occurred in an insured financial
obligation. This Statement also clarifies how Statement 60 applies to
financial guarantee insurance contracts, including the recognition and
measurement to be used to account for premium revenue and claim
liabilities. This Statement requires expanded disclosures about financial
guarantee insurance contracts. SFAS No. 163. is effective for financial
statements issued for fiscal years beginning after December 15, 2008.
Currently the Company does not anticipate that this statement will have an
impact on its financial statements.
|
|
|
|
3.
|
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
|
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
3.
|
ACQUISITION
(Continued)
|
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
|
|
4.
|
DISCONTINUED OPERATIONS
|
|
|
|
Pursuant to an agreement dated June 5, 2008, on July 7,
2008 the Company completed the sale of its wholly owned subsidiary
Company, Worldbid International Inc. and all the assets and liabilities of
its internet business to Markteck Acquisition Corp. In consideration the
Company received $50,000 and the assumption of approximately $93,000 in
liabilities. (See Note 16).
|
|
|
|
The transaction was valued at the fair value of the
assets and liabilities disposed of.
|
|
|
|
The following table summarizes the identifiable assets
and liabilities of the business segment disposed of as of April 30, 2008
and 2007.
|
|
|
|
APRIL 30
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Assets Held for Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Cash
|
$
|
3,969
|
|
$
|
14,316
|
|
|
Receivables - other
|
|
2,746
|
|
|
7,524
|
|
|
|
|
6,715
|
|
|
21,840
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
32,247
|
|
|
31,079
|
|
|
Property and equipment
(net)
|
|
2,917
|
|
|
4,649
|
|
|
|
|
|
|
|
|
|
|
Total Assets Held for Discontinued Operations
|
$
|
41,879
|
|
$
|
57,568
|
|
|
|
|
|
|
|
|
|
|
Liabilities Held for Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
68,823
|
|
$
|
69,019
|
|
|
Deferred income
|
|
14,070
|
|
|
18,885
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities Held for Discontinued Operations
|
$
|
82,893
|
|
$
|
87,904
|
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
5.
|
PROPERTY AND EQUIPMENT
|
|
|
|
Property and equipment consists of the
following:
|
|
|
|
APRIL 30
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Computer equipment and software
|
$
|
-
|
|
$
|
3,500
|
|
|
Support equipment
|
|
-
|
|
|
13,052
|
|
|
Less: Accumulated
depreciation
|
|
-
|
|
|
(2,771
|
)
|
|
|
$
|
-
|
|
$
|
13,781
|
|
6.
|
LICENSE RIGHTS
|
|
|
|
License rights consist of the
following:
|
|
|
|
APRIL 30
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Licensing rights
|
$
|
3,000
|
|
$
|
3,000
|
|
|
Less: Accumulated depreciation
|
|
(401
|
)
|
|
(201
|
)
|
|
|
$
|
2,559
|
|
$
|
2,799
|
|
7.
|
DEPOSIT ON UNPROVEN OIL AND GAS PROPERTY RELATED
PARTY
|
|
|
|
On April 2, 2008, the Company issued 50,000,000 common
shares and advanced $340,000 to May Petroleum Inc. (May) pursuant to an
oil and gas property agreement whereby the Company would acquire May
Petroleum, Incs interest in an oil and gas prospect in Matagorda County,
Texas. The fair value of the stock issuance was $12,000,000. As at April
30, 2008 title to the interest in the property had not been transferred to
the Company. Transfer of title was completed on June 2, 2008.
|
|
|
|
As a result of the share issuance, May Petroleum Inc.
became the Companys majority shareholder, and the President of May
Petroleum was appointed as an officer and director of the
Company.
|
|
|
|
The Company also issued 1,000,000 common shares as
finders fees in relation to the above transaction. The fair value of the
stock issuance was $360,000.
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
8.
|
UNPROVEN OIL AND GAS PROPERTIES
(Continued)
Unproven oil and gas properties consist of the
following:
|
|
|
|
APRIL 30
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Acquisition costs
|
$
|
2,564,701
|
|
$
|
2,413,684
|
|
|
Less: Write off of abandoned property
|
|
(92,000
|
)
|
|
-
|
|
|
|
|
2472,701
|
|
|
2,413,684
|
|
|
|
|
|
|
|
|
|
|
Exploration costs
|
|
2,897,025
|
|
|
2,250,118
|
|
|
Less: Write off of cost on abandoned
well
|
|
(2,849,313
|
)
|
|
(2,250,118
|
)
|
|
|
|
47,712
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,520,413
|
|
$
|
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.
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
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
8.
|
UNPROVEN OIL AND GAS PROPERTIES
(Continued)
|
|
|
|
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.
|
|
|
|
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.
|
|
|
|
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 with a fair value of $92,000. In order to exercise this
option, the Company must provide CULA with a written notice of exercise on or before November 21, 2007.
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
8.
|
UNPROVEN OIL AND GAS PROPERTIES
(Continued)
|
|
|
|
|
|
Upon exercise of the 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);
|
|
|
|
|
|
|
(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
|
|
|
|
|
|
The Company failed to meet the conditions for closing, and accordingly the fair value of the 200,000 common shares issued of $92,000 has been written off in the period. The Company has decided to no longer pursue this
property.
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
8.
|
UNPROVEN OIL AND GAS PROPERTIES
(Continued)
|
|
|
|
On January 1, 2008, the Company renewed oil and gas
leases with 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 $5,070 for the annual lease costs.
|
|
|
|
On April 3, 2008, the Company renewed oil and gas leases
with 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 annual lease costs.
|
|
|
|
On April 14, 2008, the Company renewed oil and gas leases
with the State of Utah representing a 100% working interest in 5 parcels
totaling 3,501 acres situated in Piute, Iron and Garfield Counties of
Utah. The Company paid the State of Utah a total of $5,568 for the annual
lease costs.
|
|
|
|
From May 1, 2007 to April 30, 2008, the Company
capitalized $47,712 in engineering costs related to regulatory reporting
and filing, and the mapping, surveying, permitting and site release of
future planned well drilling locations.
|
|
|
9.
|
LOANS PAYABLE RELATED PARTIES
|
|
|
|
Loans payable comprise the
following:
|
|
|
|
APRIL 30
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Amount due to a director, is unsecured, payable
|
|
|
|
|
|
|
|
on demand and bears interest at 10% per
|
|
|
|
|
|
|
|
annum.
|
$
|
26,680
|
|
$
|
21,680
|
|
|
Amount due to significant shareholder,
|
|
|
|
|
|
|
|
unsecured, payable on demand and
non
|
|
|
|
|
|
|
|
interest bearing
|
|
20,070
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
$
|
46,750
|
|
$
|
21,680
|
|
10.
|
SHARE SUBSCRIPTIONS RECEIVED
|
|
|
|
Pursuant to a private placement offering of 8,660,000
common shares at $0.25 to raise gross proceeds of $2,165,000, as at April
30, 2008 the Company had received share subscriptions amounting to
$364,985 (2007 nil).
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
11.
|
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 International Inc.
|
|
|
|
|
12
|
CAPITAL STOCK
|
|
|
|
|
|
a)
|
Common and Preferred Stock:
|
|
|
|
|
|
|
As of April 30, 2008, there were 88,107,270 shares of common stock outstanding and zero shares of preferred stock outstanding. Outstanding shares of common stock consist 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.
|
|
|
|
|
|
|
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. The fair value of the issuance was $92,000
|
|
|
|
|
|
|
ix)
|
On November 30, 2007, the Company issued 100,000 common shares pursuant to on investor relations agreement. The fair value of the issuance was $57,000.
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
12
|
CAPITAL STOCK (Continued)
|
|
|
|
|
|
a)
|
Common and Preferred Stock (Continued)
|
|
|
|
|
|
|
x)
|
On April 2, 2008, the Company issued 50,000,000 common
shares to May Petroleum Inc. (May) pursuant to an oil and gas property
agreement. The fair value of the issuance was $12,000,000. (Note
7)
|
|
|
|
|
|
|
xi)
|
On April 2, 2008, the Company issued 1,000,000 common
shares as commission in connection with the oil and gas property acquired
on April 2, 2008 from May Petroleum Inc. The fair value of the issuance
was $360,000. (Note 7)
|
|
|
|
|
|
b)
|
Share Purchase Warrants
|
|
|
|
|
|
|
As at April 30, 2008, no share purchase warrants are
outstanding.
|
|
|
|
|
|
|
Warrants to purchase 1,740,081 and 1,231,017 common
shares at $0.85 and $1.75 respectively expired during the year ended April
30, 2008.
|
|
|
|
|
13.
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
a)
|
Commitments
|
|
|
|
|
|
|
i)
|
The Company has operating leases for its offices. Future
minimum lease payments under the operating leases for the facilities are
as follows:
|
12
Months ended April 30, 2009
|
$
|
1,800
|
|
|
ii)
|
On April 2, 2008, the Company entered into a management
agreement with the Chairman and Chief Executive Officer. Pursuant to the
terms of the management agreement, a management fee of $10,000 per month
is to be paid based on a commitment to work 90 hours per month on our
business development. The term of the management agreement is for a period
of two years expiring at the close of business on March 31, 2010, unless
otherwise terminated pursuant to the terms of the agreement or extended by
the Board.
|
|
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.
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
13.
|
COMMITMENTS AND CONTINGENCIES
(Continued)
|
|
|
|
|
b)
|
Contingencies (Continued)
|
|
|
|
|
|
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 April 30, 2008, 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.
|
|
|
|
14.
|
RELATED PARTY TRANSACTIONS
|
|
|
|
|
a)
|
Included in accounts payable is $111,991 (April 30, 2007
- $6,836) due to a directors or Companies controlled by directors of the
Company. The amount is unsecured and without specified terms of
repayment.
|
|
|
|
|
b)
|
Included in liabilities held for discontinued operations
is $4,603 (April 30, 2007 - $5,136) due to a director.
|
|
|
|
|
c)
|
Included in deposits on Oil and Gas Property is an amount
of $12,340,000 due to a Company controlled by a director. (Note
7)
|
|
|
|
|
d)
|
During the years ended April 30, 2008 and 2007 the
Company accrued or was charged the following amounts by directors, and
companies with a common director or officer:
|
|
|
|
APRIL
30
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Income Statement Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting fees
|
$
|
141,329
|
|
|
90,000
|
|
|
Interest expense
|
|
2,293
|
|
|
361
|
|
|
Management fees
|
|
140,000
|
|
|
20,000
|
|
|
Loss on discontinued operations
|
|
110,331
|
|
|
16,348
|
|
|
|
|
|
|
|
|
|
|
|
$
|
393,953
|
|
$
|
126,709
|
|
15.
|
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 years ended April 30, 2008 and 2007 are as
follows:
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
15.
|
SEGMENTED INFORMATION
(Continued)
|
|
April 30, 2008
|
|
USA
|
|
|
Canada
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
$
|
15,350,440
|
|
$
|
41,879
|
|
$
|
15,392,319
|
|
|
Liabilities
|
$
|
1,711,857
|
|
$
|
82,893
|
|
$
|
1,794,750
|
|
|
Loss for the period
|
$
|
1,515,988
|
|
$
|
37,528
|
|
$
|
1,553,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2007
|
|
USA
|
|
|
Canada
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
$
|
3,881,609
|
|
$
|
57,568
|
|
$
|
3,939,177
|
|
|
Liabilities
|
$
|
1,202,670
|
|
$
|
87,904
|
|
$
|
1,290,574
|
|
|
Loss for the period
|
$
|
4,150,338
|
|
$
|
9,719
|
|
$
|
4,160,057
|
|
16.
|
SUBSEQUENT EVENTS
|
|
|
|
|
|
a)
|
On June 2, 2008, title to the oil and gas property
interest acquired from May Petroleum Inc. (May) was transferred to the
Company.
|
|
|
|
|
|
|
Under the terms of the Agreement, May transferred and
assigned to us all its right, title and interest in the Prospect, the
Purchase and Sale Agreement and the Data in consideration of the
following:
|
|
|
|
|
|
|
i)
|
the issuance to May of 50,000,000 shares (the Shares)
of our common stock within five (5) business days of the date of the
Agreement (issued during the year ended April 30, 2008); and
|
|
|
|
|
|
|
ii)
|
the reimbursement to May within thirty (30) days of the
date of the Agreement of the $100,000 deposit paid by May under the
Purchase and Sale Agreement (paid during the year ended April 30,
2008).
|
|
|
|
|
|
|
The Agreement also contemplates that any other property
interest acquired in the Area of Mutual Interest shall become part of the
Prospect and subject to the Agreement.
|
|
|
|
|
|
|
The Company will be responsible for making all payments
and completing all acts required under the Purchase and Sale Agreement or
any other agreements in respect of properties comprising the Prospect.
Subsequent to the year end the Company had paid an additional $580,000
pursuant to the agreement.
|
|
|
|
|
|
|
Pursuant to the terms of the lease acquired the Company
was required to commence drilling operations on or before August 1, 2008.
In addition, the Company is obligated to pay an operation bonus payment of
$150,000 to the landowner. On August 1, 2008, the Company commenced
drilling operations on the prospect.
|
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2008
(Stated in U.S. Dollars)
16.
|
SUBSEQUENT EVENTS
(Continued)
|
|
|
|
|
b)
|
On July 7, 2008, Royalite Petroleum Company Inc. (the Company) completed the disposition of Worldbid International Inc. (Worldbid), its internet business, to Marktech Acquisition Corp.
(Marktech). The disposition was completed pursuant to the terms and conditions of the Share Purchase Agreement dated June 5, 2008 (the Share Purchase Agreement) among the Company, Marktech and Worldbid. Under the terms of the
Share Purchase Agreement, the Company sold all of the shares of Worldbid and all Worldbid related business assets to Marktech in consideration of $50,000 and the assumption of approximately $93,000 in liabilities. The cash portion of the
purchase price consisted of $25,000 in cash and a non-interest bearing promissory note in the amount of $25,000 in favor of the Company due on August 6, 2008. As additional consideration, the Company assigned to Marktech its right and
interest in the intercompany loan between the Company and Worldbid. In addition, Marktech will indemnify the Company from any liabilities or damages arising out of the liabilities of Worldbid and the liabilities assumed by Marktech. The Company
disposed of the subsidiary in order to concentrate its efforts on its core oil and gas business.
|
|
|
|
|
c)
|
On August 6, 2008, the Company completed a private placement of 8,660,000 shares of common stock at a price of $0.25 per share for gross proceeds of $2,165,000.
|
|
|
|
|
d)
|
On August 7, 2008, the Board of Directors approved a private placement offering of up to 12,500,000 shares of common stock at a price of $0.40 per share for aggregate gross proceeds of $5,000,000. We may also pay
commissions of up to 10% where permitted by law to licensed brokers or investment dealers or other qualified finders introducing purchasers of the Private Placement Offering. There is no assurance that the Private Placement Offering will be
completed on the above terms or at all.
|
ITEM
9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
ITEM
9AT. CONTROLS AND
PROCEDURES.
We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission rules and forms, and that
such information is accumulated and communicated to our management to allow
timely decisions regarding required disclosure based closely on the definition
of "disclosure controls and procedures" in Rule 13a-15(e) and 15d-15(e). In
designing and evaluating the disclosure controls and procedures, management
recognized that all internal control systems, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
We carried out an assessment, with the participation of our
principal executive officer and principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered in this report. Based on the
foregoing, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures were effective.
There has been no change in our internal controls over
financial reporting that occurred during the period covered by this Annual
Report on Form 10-K that has materially affected, or is reasonably likely to
materially affect, its internal controls over financial reporting.
Managements Annual Report on Internal Control Over
Financial Reporting
.
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting for us, as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal
control system was designed to provide reasonable assurance to our management
and Board of Directors regarding the preparation and fair presentation of
published financial statements.
Management assessed the effectiveness of our internal control
over financial reporting based on the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in
Internal
Control - Integrated Framework
. Based on its assessment, management
concluded that its internal control over financial reporting was effective as of
April 30, 2008.
This annual report does not include an attestation report of
our registered public accounting firm regarding internal control over financial
reporting. Managements report was not subject to attestation by our registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit us to provide only managements report in this
annual report.
Limitations on the Effectiveness of Internal
Controls
Our management does not expect that its disclosure controls and
procedures, nor its internal control over financial reporting, will necessarily
prevent all fraud and material error. Our disclosure controls and procedures are
designed to provide reasonable assurance of achieving its objectives and our
Chief Executive Officer and Chief Financial Officer concluded that the
disclosure controls and procedures are effective at a reasonable, but not
absolute, assurance level. Further, the design of a control system must reflect
the fact that there are resource constraints, and the benefits of controls must
be considered relative to the costs.
Because of the inherent limitations in all control systems, no
assessment of controls can provide absolute assurance that all control issues
and instances of fraud, if any, will be detected. Inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of a simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by
22
collusion of two or more people, or by management override of
internal control. The design of any system of controls also is based in part
upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions. Over time the degree of compliance with the
policies or procedures may deteriorate or the controls may become inadequate due
to changes in conditions.
ITEM
9B. OTHER
INFORMATION.
1.
|
On August 6, 2008, we completed a private placement of
8,660,000 shares of our common stock at a price of $0.25 per share for
gross proceeds of $2,165,000 (the Private Placement). We previously
announced the Private Placement for the sale of up to 8,000,000 shares of
our common stock. As the Private Placement was oversubscribed, our Board
of Directors approved an increase in the Private Placement of up to
8,660,000 shares of our common stock. The proceeds of the Private
Placement will be used to fund our business and for working capital
purposes. The offering was made to accredited investors pursuant to Rule
506 of Regulation D promulgated under the Securities Act.
|
|
|
2.
|
On August 7, 2008, our Board of Directors approved a
private placement offering of up to 12,500,000 shares of our common stock
at a price of $0.40 per share for aggregate gross proceeds of $5,000,000
(the Private Placement Offering). The proceeds of the Private Placement
Offering will be used to fund our business and for working capital
purposes. The Private Placement Offering will be made to accredited
investors pursuant to Rule 506 of Regulation D promulgated under the
Securities Act. We may also pay commissions of up to 10% where permitted
by law to licensed brokers or investment dealers or other qualified
finders introducing purchasers of the Private Placement Offering. There is
no assurance that the Private Placement Offering will be completed on the
above terms or at all.
|
23
PART III
ITEM
10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table sets forth the names and positions of our
officers and directors as of the date hereof.
Name
|
Age
|
Positions
|
Norris R. Harris
|
74
|
Chief Executive Officer, Chairman and Director
|
D. James Fajack
|
72
|
Chief Financial Officer and Director
|
Logan B. Anderson
|
54
|
President, Secretary, Treasurer and Director
|
Set forth below is a brief description of the background and
business experience of our executive officers and directors:
Norris R. Harris.
Mr. Harris was appointed our Chief
Executive Officer, Chairman and a member of our Board of Directors on March 31,
2008. Mr. Harris has considerable experience over the past 50 years in oil and
gas exploration, founding and restructuring of oil and gas companies and in oil
and gas drilling and operations. Mr. Harris has been a member of the AAPG
(American Association of Petroleum Geologists) since October 20, 1980 and is an
Emeritus Member of the Society Exploration Geophysicists. Mr. Harris has an
extensive base of contacts in the oil and gas industry and the Company believes
his appointment will provide the expertise required for the Company to properly
evaluate and exploit its existing oil and gas properties and to seek other
opportunities in the oil and gas industry.
Over the past five years, Mr. Harriss business experience is
as follows:
-
|
From January 1, 2003 to present,
Mr. Harris owned and operated Gulfport Oil And Gas, Inc.;
|
-
|
From January 1, 2006 to present,
he owned and operated Range Resources;
|
-
|
From January 1, 2007 to present,
he owned and operated May Petroleum, Inc.; and
|
-
|
Since 1988 he has drilled wells
for his own account in Alabama and Texas.
|
Mr. Harris has also acted as an officer or director of Texas
Arkansas Petroleum Company, Centex Oil & Gas Inc., and Basin Exploration
Corporation, all of which corporations were engaged in oil and gas exploration.
He also has considerable international oil and gas exploration experience as a
geophysicist with Mobil Oil Corporation where he worked in Turkey, Austria,
Holland, England (North Sea) and Nigeria.
D. James Fajack.
Mr. Fajack was appointed our Chief
Financial Officer and a member of our Board of Directors on April 11, 2008. Mr.
Fajack, a Certified Public Accountant, received his BS Degree with Honors from
John Carrol University and an MBA from Case Western Reserve University.
Since March 1, 2001, Mr. Fajack has served as the chief
operating officer of Marjorie and Associates, P.C., managing the business of a
commercial law firm in Texas. Mr. Fajack has also served as an officer or
director of several publicly traded companies including:
-
|
OKC Corp. (NYSE)
|
-
|
Buttes Gas & Oil (NYSE)
|
-
|
Remington Oil & Gas (NYSE)
|
-
|
OKC Partners (NASD)
|
-
|
King Resources, Inc.
|
Logan B. Anderson.
Mr. Anderson is our President,
Secretary, Treasurer and a member of our Board of Directors. Mr. Anderson is a
graduate of Otago University, New Zealand, with a Bachelor's Degree of Commerce
in Accounting and Economics (1977). He is an Associated Chartered Accountant
(New Zealand) and was employed by Coopers & Lybrand in New Zealand
(1977-1980) and Canada (1980-1982). From 1982 to 1992, Mr. Anderson was
comptroller of Cohart Management Group, Inc., a management service company which
was responsible for the management of a number of private and public companies.
Mr. Anderson has been principal and president of Amteck Financial Services
Company, a financial consulting service company
24
since 1993. Mr. Anderson has been an officer and director of a
number of private and public companies in the past 12 years, including PLC
Systems, Inc. and 3D-Systems Inc. Mr. Anderson has also served as an officer or
director of several publicly traded companies including Royal Mines and Minerals
Corp. (OTCBB) and XLR Medical Corp. (OTC PinkSheets).
Significant Employees
Other than our executive officers and directors, we have no
significant employees.
Committees Of The Board Of Directors
We do not have a separately designated audit committee. As
such, our entire Board of Directors acts as our audit committee.
We do not have a separately designated compensation committee,
nominating committee, an executive committee of our board of directors, stock
plan committee or any other separately designated committees.
Audit Committee Financial Expert
Our Board of Directors has determined that each of D. James
Fajack and Logan B. Anderson, qualify as an audit committee financial expert
within the meaning prescribed by Item 407(d)(5) of Regulation S-K by virtue of
their professional qualifications as certified public accountant and associated
chartered accountant, respectively, and their experience.
Terms of Office
Our directors are appointed for one year terms to hold office
until the next annual general meeting of our stockholders or until removed from
office in accordance with our by-laws. Our officers are appointed by our Board
of Directors and hold office until removed by our Board of Directors.
Code of Ethics
We adopted a Code of Ethics applicable to our principal
executive officer, principal financial officer, and our principal accounting
officer, which is a "code of ethics" as defined by applicable rules of the SEC.
Our Code of Ethics is attached to our Annual Report on Form 10-KSB for the year
ended April 30, 2004. If we make any amendments to our Code of Ethics other than
technical, administrative, or other non-substantive amendments, or grant any
waivers, including implicit waivers, from a provision of our Code of Ethics to
our principal executive officer, principal financial officer, or our principal
accounting officer, we will disclose the nature of the amendment or waiver, its
effective date and to whom it applies in a Current Report on Form 8-K filed with
the SEC.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires our executive
officers and directors, and persons who beneficially own more than 10% of our
equity securities (collectively, the Reporting Persons), to file reports of
ownership and changes in ownership with the SEC. Reporting Persons are required
by SEC regulations to furnish us with copies of all forms they file pursuant to
Section 16(a). Based on our review of the copies of such forms received by us,
other than as described below, no other reports were required for those persons,
and we believe that during the year ended April 30, 2008, all Reporting Persons
complied with all Section 16(a) filing requirements applicable to them.
The following persons have failed to file, on a timely basis,
the identified reports required by Section 16(a) of the Securities Exchange Act
of 1934:
25
Name and Principal Position
|
Number of
Late Reports
|
Transactions
Not Timely
Reported
|
Known Failures to
File a Required
Form
|
Norris R. Harris
|
Two
|
Two
|
Two
|
Chairman, Chief
Executive Officer, and Director
|
|
|
|
|
|
|
|
D. James Fajack
|
One
|
One
|
None
|
Chief Financial
Officer and Director
|
|
|
|
|
|
|
|
Logan B. Anderson
|
None
|
None
|
None
|
President,
Secretary, Treasurer and Director
|
|
|
|
|
|
|
|
William Charles Tao
(1)
|
|
|
|
Former Director
|
None
|
None
|
None
|
|
|
|
|
Michael L. Cass
(2)
|
None
|
None
|
None
|
Former Chief Executive Officer, Former President
|
|
|
|
and Former
Director
|
|
|
|
Notes:
|
|
1.
|
Dr. Tao resigned as a director on June 16,
2008.
|
2.
|
Mr. Cass resigned as a director and executive officer on
February 18, 2008.
|
ITEM
11. EXECUTIVE
COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth total compensation paid to or
earned by our named executive officers, as that term is defined in Item
402(m)(2) of Regulation S-K during the fiscal years ended April 30, 2008 and
2007.
SUMMARY COMPENSATION TABLE
|
Name & Principal
Position
|
Year
End
April 30,
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compen-
sation ($)
|
Nonqualified
Deferred
Compen-
sation
Earnings
($)
|
All Other
Compen-
sation
($)
|
Total
($)
|
Norris R. Harris
(1)
Chairman, CEO &
Director
|
2008
2007
|
$10,000
n/a
|
$0
n/a
|
$0
n/a
|
$0
n/a
|
$0
n/a
|
$0
n/a
|
$0
n/a
|
$10,000
n/a
|
D. James Fajack
(2)
CFO & Director
|
2008
2007
|
$0
n/a
|
$0
n/a
|
$0
n/a
|
$0
n/a
|
$0
n/a
|
$0
n/a
|
$0
n/a
|
$0
n/a
|
Logan B. Anderson
(3)
President, Secretary,
Treasurer & Director
Former CEO and
Former CFO
|
2008
2007
|
$120,000
$105,000
|
$0
$0
|
$0
$0
|
$0
$0
|
$0
$0
|
$0
$0
|
$0
$0
|
$120,000
$105,000
|
26
Michael L. Cass
(4)
Former CEO,
Former
President & Former
Director
|
2008
2007
|
$116,129
$20,000
|
$0
$0
|
$0
$0
|
$0
$0
|
$0
$0
|
$0
$0
|
$0
$0
|
$116,129
$20,000
|
Howard Thomson
(5)
Former
executive
officer, former director
|
2008
2007
|
n/a
$9,000
|
n/a
$0
|
n/a
$0
|
n/a
$0
|
n/a
$0
|
n/a
$0
|
n/a
$0
|
n/a
$9,000
|
Notes:
|
|
(1)
|
Mr. Harris was appointed the Chairman, CEO and a director
on March 31, 2008. Mr. Harris is compensated $10,000 per month for his
services pursuant to a Management Agreement dated April 2, 2008.
|
(2)
|
Mr. Fajack was appointed the CFO and a director on April
11, 2008.
|
(3)
|
Mr. Anderson has served in various officer capacities.
Mr. Anderson is currently the President, Secretary, Treasurer and a
director.
|
(4)
|
Mr. Cass resigned as a director and executive officer on
February 18, 2008. Mr. Cass was compensated for his services pursuant to a
consulting agreement between Royalite Corp. and Nitra Corporation, a
company in which Mr. Cass acts as its president. The compensation provided
in the table above was paid to Nitra Corporation for the period from March
1, 2007 to February 18, 2008. Royalite Corp. paid Nitra Corporation a
total of $94,000 under the terms of Nitra Corporations contract with
Royalite Corp. for the period from June 1, 2006 to February 28,
2007.
|
(5)
|
Mr. Thomson resigned as our Chief Financial Officer,
Secretary, Treasurer and as a member of our Board of Directors on August
31, 2006.
|
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
As at our fiscal year ended April 30, 2008, we had no
outstanding equity awards.
Compensation of Directors
The following table sets forth total compensation paid to or
earned by our directors, other than directors who are also named executive
officers as that term is defined in Item 402(m)(2) of Regulation S-K, during the
fiscal year ended April 30, 2008:
DIRECTOR
COMPENSATION
|
Name &
Principal Position
|
Year
Ended
April 30
|
Fees
Earned/
Paid in
Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compen-
sation ($)
|
Nonqualified
Deferred
Compen-
sation
Earnings
($)
|
All Other
Compen-
sation
($)
|
Total
($)
|
William C. Tao
(1)
Former Director
|
2008
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
Notes:
|
|
(1)
|
Dr. Tao served as a member of our Board of Directors from
July 10, 2006 until his resignation on June 16,
2008.
|
Employment Agreements
Norris R. Harris, our Chief Executive Officer and Chairman, is
paid pursuant to a management agreement with us dated April 2, 2008. Pursuant to
the terms of the agreement, Mr. Harris is to be paid a management fee of $10,000
per month based on Mr. Harris committing 90 hours per month on our business
development in consideration for acting as our Chairman and Chief Executive
Officer and providing management services to us. The term of the agreement is
for a period of two years expiring at the close of business on March 31, 2010,
unless otherwise terminated pursuant to the terms of the agreement or extended
by the Board.
27
Logan B. Anderson, our President, Secretary and Treasurer and
one of our directors, is paid pursuant to an executive consultant agreement with
us dated September 1, 2001. This consultant agreement was amended effective
November 1, 2002, August 29, 2003 and April 30, 2005 to reduce the consulting
fee that paid to Mr. Anderson from $12,500 per month to $3,000 per month and to
extend the term of the agreement. Effective
May 1, 2005,
we
verbally agreed to increase the consulting fee paid to Mr. Anderson up to $5,000
per month, and effective August 1, 2006, we verbally agreed to increase the
consulting fee to $10,000 per month. The amended consultant agreement is
automatically renewable on a month to month basis provided that we can terminate
the consultant agreement without cause upon the payment to Mr. Anderson of an
amount equal to the six months consultant fee.
Paul Wagorn, the Secretary, Treasurer and Chief Operating
Officer of Worldbid International Inc. (Worldbid), our former internet
business, was paid pursuant to a consulting contract with Worldbid. Mr. Wagorn
provided his services to us as a consultant. As a result of our disposition of
Worldbid, we are no longer obligated to pay Mr. Wagorn his consulting fee.
We do not currently have an employment, consulting or other compensation
agreement with Mr. Fajack, our Chief Financial Officer and a director.
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS
AND
MANAGEMENT
AND RELATED STOCKHOLDER
MATTERS.
|
EQUITY COMPENSATION PLANS
We do not currently have any equity compensation plans
(including individual compensation arrangements) in place under which our equity
securities are authorized for issuance.
Plan Category
|
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options
(a)
|
Weighted-Average
Exercise
Price of
Outstanding Options
(b)
|
Number of Securities Remaining
Available for Future
Issuance
Under Equity Compensation
Plans (Excluding Securities
Reflected in column (a))
(c)
|
Equity Compensation Plans
Approved By Security
Holders
|
Nil
|
N/A
|
Nil
|
Equity Compensation Plans
Not Approved By Security
Holders
|
Nil
|
N/A
|
Nil
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information concerning
the number of shares of our common stock owned beneficially as of August 6,
2008
by: (i) each person (including any group) known to us to own more
than five percent (5%) of any class of our voting securities, (ii) each of our
directors and each of our named executive officers (as defined under Item
402(m)(2) of Regulation S-K), and (iii) officers and directors as a group.
Unless otherwise indicated, the shareholders listed possess sole voting and
investment power with respect to the shares shown.
28
Title of Class
|
Name and Address
of Beneficial
Owner
|
Number of Shares
of Common
Stock
(1)
|
Percentage of
Common
Stock
(1)
|
DIRECTORS AND OFFICERS
|
Common Stock
|
Norris R. Harris
Chairman, CEO & Director
|
50,000,000
(indirect)
(2)
|
51.6%
|
Common Stock
|
D. James Fajack
CFO & Director
|
Nil
|
Nil
|
Common Stock
|
Logan B. Anderson
President, Secretary, Treasurer & Director
|
1,883,623
(direct)
|
1.9%
|
Common Stock
|
All Officers and Directors
as a Group (3 persons)
|
51,883,623
|
53.6%
|
5% SHAREHOLDERS
|
Common Stock
|
May Petroleum, Inc.
1200 Nueces Street
Austin, Texas 78701
|
50,000,000
(direct)
|
51.6%
|
(1)
|
Under Rule 13d-3, a beneficial owner of a security
includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship, or otherwise has or shares: (i)
voting power, which includes the power to vote, or to direct the voting of
shares; and (ii) investment power, which includes the power to dispose or
direct the disposition of shares. Certain shares may be deemed to be
beneficially owned by more than one person (if, for example, persons share
the power to vote or the power to dispose of the shares). In addition,
shares are deemed to be beneficially owned by a person if the person has
the right to acquire the shares (for example, upon exercise of an option)
within 60 days of the date as of which the information is provided. In
computing the percentage ownership of any person, the amount of shares
outstanding is deemed to include the amount of shares beneficially owned
by such person (and only such person) by reason of these acquisition
rights. As a result, the percentage of outstanding shares of any person as
shown in this table does not necessarily reflect the persons actual
ownership or voting power with respect to the number of shares of common
stock actually outstanding on August 6, 2008. As of August 6, 2008, there
were 96,864,054 shares of our common stock issued and
outstanding.
|
|
|
(2)
|
Norris R. Harris is a controlling shareholder of May
Petroleum, Inc. and, accordingly, indirectly holds 51.6% of our issued and
outstanding common stock.
|
CHANGES IN CONTROL
We are not aware of any further arrangement that might result
in a change in control in the future.
ITEM
13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
RELATED TRANSACTIONS
Except as described below, none of the following parties has,
during the last two fiscal years, had any material interest, direct or indirect,
in any transaction with us or in any presently proposed transaction that has or
will materially affect us, other than noted in this section:
|
(i)
|
Any of our directors or officers;
|
|
(ii)
|
Any person proposed as a nominee for election as a
director;
|
29
|
(iii)
|
Any person who beneficially owns, directly or indirectly,
shares carrying more than 10% of the voting rights attached to our
outstanding shares of common stock;
|
|
(iv)
|
Any of our promoters; and
|
|
(v)
|
Any relative or spouse of any of the foregoing persons
who has the same house as such person.
|
On February 28, 2007, we completed the acquisition of Royalite
Corp. The following related persons had a material interest in our acquisition
of Royalite Corp.:
Name
|
Relationship to the
Company
|
Interest in the
Transaction
|
Michael L. Cass
|
Former CEO, Former President and Former
Director.
|
Mr. Cass received an aggregate of 3,000,000 shares of our
common stock in exchange for the shares or Royalite Corp. owned by him at
the time the acquisition was completed.
At the time the
transaction was completed, Mr. Cass was also the CEO, President and a
Director of Royalite Corp.
|
William Charles Tao
|
Former Director.
|
Mr. Tao received an aggregate of
400,000 shares of our common stock in exchange for the shares of Royalite
Corp. owned by him at the time the acquisition was completed.
|
K. Ian Matheson
|
Former owner of more than 5% of outstanding
stock.
|
Mr. Matheson received an
aggregate of 2,825,000 shares of our common stock in exchange for the
shares of Royalite Corp. owned by him at the time the acquisition was
completed.
At the time the transaction was completed, Mr. Matheson
was also the Chief Financial Officer, Treasurer, Secretary and a Director
of Royalite Corp.
|
Debra Matheson
|
Spouse of former owner of more than 5% of
outstanding stock.
|
Mrs. Matheson received an
aggregate of 1,500,000 shares of our common stock in exchange for the
shares of Royalite Corp. owned by her at the time the acquisition was
completed.
|
Harold C. Moll
|
Former owner of more than 5% of outstanding
stock.
|
Mr. Moll received an aggregate of
3,802,000 shares of our common stock in exchange for the shares of
Royalite Corp. owned by him at the time the acquisition was completed.
|
On April 2, 2008, May Petroleum, Inc. (May) acquired
50,000,000 shares of our common stock pursuant to the terms of an agreement
dated April 2, 2008 with May to acquire Mays interest in an oil and gas
prospect (the Prospect) in Matagorda County, Texas (the Agreement). May is a
company controlled by Norris R. Harris, the Companys Chairman, Chief Executive
Officer and Director. Although the Agreement was entered into on April 2, 2008,
its principal terms were negotiated with Mr. Harris prior to him becoming a
director or officer on the Company on March 31, 2008.
DIRECTOR INDEPENDENCE
Our common stock is quoted on the OTC Bulletin Board
inter-dealer quotation system, which does not have director independence
requirements. Under NASDAQ Rule 4200(a)(15), a director is not considered to be
independent if he or she is also an executive officer or employee of the
corporation. There is no member of our Board who is not an executive officer or
employee. As a result, we no independent directors.
As a result of our limited operating history and minimal
resources, our management believes that it will have difficulty in attracting
independent directors. In addition, we would likely be required to obtain
directors and
30
officers insurance coverage in order to attract and retain
independent directors. Our management believes that the costs associated with
maintaining such insurance is prohibitive at this time.
ITEM
14. PRINCIPAL
ACCOUNTING FEES AND SERVICES.
The aggregate fees billed for the fiscal years ended April 30,
2008 and April 30, 2007 for professional services rendered by the principal
accountant for the audit of the Corporations annual financial statements and
review of the financial statements included in our Quarterly Reports on Form
10-QSB and services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements for these fiscal periods
were as follows:
|
Year Ended April 30, 2008
|
Year Ended April 30, 2007
|
Audit Fees
|
$28,720
|
$16,309
|
Audit-Related Fees
|
$0
|
$0
|
Tax Fees
|
$0
|
$0
|
All Other Fees
|
$0
|
$0
|
Total
|
$
28,720
|
$16,309
|
ITEM
15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
Exhibit
|
Description of Exhibit
|
Number
|
|
|
|
2.1
|
Amended and Restated Agreement and Plan of Merger entered
into on February 9, 2007 among the Company, Royalite Acquisition Corp. and
Royalite Petroleum Corp.
(9)
|
|
|
2.2
|
Agreement and Plan of Merger entered into on February 28,
2007 between the Company and Royalite Acquisition Corp.
(10)
|
|
|
3.1
|
Amended and Restated Articles of Incorporation filed
January 13, 2006.
(8)
|
|
|
3.2
|
By-Laws of the Company.
(1)
|
|
|
3.3
|
Articles of Merger between Royalite Petroleum Corp. and
Royalite Acquisition Corp.
(10)
|
|
|
3.4
|
Articles of Merger between Royalite Acquisition Corp. and
the Company.
(10)
|
|
|
4.1
|
Specimen Stock Certificate.
(1)
|
|
|
10.1
|
Executive Consultant Agreement dated September 1, 2001
between the Company and Logan B. Anderson.
(2)
|
|
|
10.2
|
Amendment to Executive Consultant Agreement dated
November 1, 2002 between the Company and Logan B. Anderson.
(3)
|
|
|
10.3
|
Amendment to Executive Consultant Agreement dated for
reference August 29, 2003 between the Company and Logan B.
Anderson.
(4)
|
|
|
10.4
|
Amendment to Executive Consultant Agreement dated for
reference April 30, 2005 between the Company and Logan B.
Anderson.
(5)
|
|
|
10.5
|
Agreement and Plan of Merger dated August 23, 2006
between the Company and Royalite Petroleum Corp.
(6)
|
|
|
10.6
|
Settlement Agreement dated August 31, 2006 between the
Company and Howard Thomson.
(7)
|
|
|
10.7
|
Consulting Agreement dated February 8, 2006 between
Royalite Petroleum Corp. and Nitra Corporation.
(11)
|
|
|
10.8
|
Consulting Agreement dated August 1, 2007 between the
Company and Kapco Consultants Corp.
(11)
|
|
|
10.9
|
Letter Agreement dated October 1, 2007 between Central
Utah Lease Acquisition, L.P. and the Company.
(12)
|
|
|
10.10
|
Consulting Agreement dated November 30, 2007 between CRG
Partners, Inc. and the
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31
Notes
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(1)
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Filed as an Exhibit to our Registration Statement on Form
10-SB 12G/A filed with the SEC on November 30, 1999.
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(2)
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Filed as an Exhibit to our Annual Report on Form 10-KSB
filed with the SEC on August 13, 2002.
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(3)
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Filed as an Exhibit to our Quarterly Report on Form
10-QSB filed with the SEC on March 17, 2003.
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(4)
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Filed as an Exhibit to our Annual Report on Form 10-KSB
for the year ended April 30, 2004 filed with the SEC on July 30,
2004.
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(5)
|
Filed as an Exhibit to our Annual Report on Form 10-KSB
for the year ended April 30, 2005 filed with the SEC on August 12,
2005.
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(6)
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Filed as an Exhibit to our Current Report on Form 8-K
filed with the SEC on August 29, 2006.
|
(7)
|
Filed as an Exhibit to our Current Report on Form 8-K
filed with the SEC on September 7, 2006.
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(8)
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Filed as an Exhibit to our Quarterly Report on Form
10-QSB filed with the SEC on March 22, 2006.
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(9)
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Filed as an Exhibit to our Current Report on Form 8-K
filed with the SEC on February 14, 2007.
|
(10)
|
Filed as an Exhibit to our Current Report on Form 8-K
filed with the SEC on March 6, 2007.
|
(11)
|
Filed as an Exhibit to our Annual Report on Form 10-KSB
filed with the SEC on September 11, 2007.
|
(12)
|
Filed as an Exhibit to our Current Report on Form 8-K
filed with the SEC on October 12, 2007.
|
(13)
|
Filed as an Exhibit to our Current Report on Form 8-K
filed with the SEC on December 6, 2007.
|
(14)
|
Filed as an Exhibit to our Current Report on Form 8-K
filed with the SEC on February 20, 2008.
|
(15)
|
Filed as an Exhibit to our Current Report on Form 8-K
filed with the SEC on April 4, 2008.
|
(16)
|
Filed as an Exhibit to our Current Report on Form 8-K
filed with the SEC on June 6, 2008.
|
(17)
|
Filed as an Exhibit to our Current Report on Form 8-K
filed with the SEC on June 20, 2008.
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32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
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ROYALITE PETROLEUM COMPANY INC.
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Date:
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August
13, 2008
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By:
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/s/
Norris R. Harris
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NORRIS R. HARRIS
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Chief Executive Officer
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(Principal Executive Officer)
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Date:
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August
13, 2008
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By:
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/s/
D. James Fajack
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D. JAMES FAJACK
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Chief Financial Officer
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(Principal Accounting Officer)
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Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Date:
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August
13, 2008
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By:
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/s/
Norris R. Harris
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NORRIS R. HARRIS
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Director
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Date:
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August
13, 2008
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By:
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/s/
D. James Fajack
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D. JAMES FAJACK
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Director
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Date:
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August
13, 2008
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By:
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/s/
Logan B. Anderson
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LOGAN B. ANDERSON
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President, Secretary and Treasurer
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Director
|
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