As
filed with the Securities and Exchange Commission on January 18, 2007
Registration No. 333-133839
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
___________________
PRE-EFFECTIVE AMENDMENT
NO. 5
TO
FORM
SB-2
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
___________________
Calibre
Energy, Inc.
(Name
of
small business issuer on its charter)
|
Nevada
(State
or Other Jurisdiction of Incorporation or Organization)
|
1311
(Primary
Standard Industrial
Classification
Code Number)
|
88-0343804
(I.R.S.
Employer
Identification
Number)
|
1667
K Street, NW, Suite 1230
Washington,
D.C. 20006
(202)
223-4401
(Address
and telephone number
of
principal executive offices and principal place of business)
___________________
Oliver
Pennington
1667
K Street, NW, Suite 1230
Washington,
D.C. 20006
(202)
223-4401
(Name,
address and telephone number
of
agent
for service)
___________________
Copy
to:
Michael
C. Blaney
Vinson
& Elkins L.L.P.
1001
Fannin, Suite 2300
Houston,
TX 77002
(713)
758-2222
___________________
Approximate
date of commencement of proposed sale to the public:
As soon
as practicable after the effective date of this registration statement.
If
the
securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box: x
If
this
form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: o
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering: o
If
this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering: o
If
delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box: o
___________________
The
registrant hereby amends this registration statement on such date or dates
as
may be necessary to delay its effective date until the registrant shall file
a
further amendment that specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act or until this registration statement shall become effective
on
such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
Calibre
Energy, Inc.
71,433,306
Shares of Common Stock
This
prospectus relates to the resale from time to time by the selling stockholders
of up to 71,433,306 shares of our common stock, including 55,225,806 shares
of
common stock previously issued and 16,207,500 shares of common stock issuable
upon the exercise of common stock purchase warrants. The selling stockholders
may sell the shares of common stock from time to time in the principal market
on
which the stock is traded at the prevailing market price or in negotiated
transactions. The
registration statement of which the prospectus is a part, registers the resale
of more than 94% of the outstanding shares of our common stock.
Shares
of
our common stock are traded on the NASD OTC Bulletin Board under the symbol
“CBRE.OB.” On January 12, 2007, the last reported sales price for our
common stock on the OTC Bulletin Board was $2.25 per
share.
We
will
not receive any proceeds from the sale of the shares of our common stock covered
by this prospectus.
___________________________________
Investing
in our common stock involves a high degree of risk. You should read carefully
this entire prospectus, including the section captioned “Risk Factors” beginning
on page 2, before making a decision to purchase our stock.
___________________________________
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The
information in this prospectus is not complete and may be changed. Holders
may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer
to sell these securities and is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
The
date
of this prospectus is ____, 2007.
TABLE
OF CONTENTS
You
should rely only on the information contained in this prospectus. We have not
authorized anyone to provide you with information that is different. This
prospectus may only be used where it is legal to sell these shares of our common
stock. The information in this prospectus may only be accurate as of the date
of
this prospectus.
This
prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission for a continuous offering. Under this prospectus, the
selling stockholders may, from time to time, sell the shares of our common
stock
described in this prospectus in one or more offerings. This prospectus may
be
supplemented from time to time to add, update or change information in this
prospectus. Any statement contained in this prospectus will be deemed to be
modified or superseded for the purposes of this prospectus to the extent that
a
statement contained in a prospectus supplement modifies such statement. Any
statement so modified will be deemed to constitute a part of this prospectus
only as so modified, and any statement so modified will be deemed to constitute
a part of this prospectus.
The
registration statement containing this prospectus, including the exhibits to
the
registration statement, provides additional information about us, the selling
stockholders and the shares of our common stock offered under this prospectus.
The registration statement, including the exhibits, can be read on the SEC
website or at the SEC offices mentioned under the heading “Where You Can Find
More Information.”
i
The
following summary highlights selected information from this prospectus and
does
not contain all of the information that you should consider before investing
in
our common stock. This prospectus contains information regarding our businesses
and detailed financial information. You should carefully read this entire
prospectus, including the historical financial statements and related notes,
before making an investment decision.
In
this prospectus, “Calibre Energy, Inc.,” the “company,” “we,” “us” or “our”
refer to Calibre Energy, Inc., a Nevada corporation, and its subsidiaries,
except where otherwise indicated or required by context.
Our
Business
We
are an
independent natural gas and oil exploration and production company concentrating
on growing reserves and production through the exploration, development,
exploitation and acquisition of natural gas and oil reserves in North America
and in Kurdistan, Iraq. We have initially concentrated on the acquisition,
exploitation and development of producing and non-producing shale gas and
oil
properties in the Barnett Shale in Texas. Our oil and gas business was commenced
in August 2005. We specialize in acquiring oil and gas interests involved
in
extracting hydrocarbons from known gas-shale source rocks. We intend to focus
on: a) shales that are laterally extensive; b) basins where the target zones
have been previously penetrated; and c) shales that have been successfully
fraced and commercially produced. In September 2006, we expanded into Iraqi
Kurdistan, a country with the world's fourth largest proven oil
reserves.
Our
Executive Offices
Our
principal executive and administrative office facility is located at 1667 K
Street, N.W., Suite 1230, Washington, D.C. 20006 and our telephone number is
(202) 223-4401 and we have an operations office at Ashford VI, 1155 Dairy
Ashford South, Fourth Floor, Houston, TX 77079. We maintain a website at
www.calibreenergy.com
, however
the information on our website is not part of this prospectus, and you should
rely only on information contained in this prospectus when making a decision
as
to whether or not to invest in shares of our common stock.
1
The
shares offered hereby have not been approved or disapproved by the SEC or the
securities regulatory authority of any state, nor has any such regulatory body
reviewed this Prospectus for accuracy or completeness. The shares offered hereby
are speculative, involve an unusually high degree of risk and should only be
purchased by those who can afford to lose their entire investment. Therefore,
prospective investors should carefully consider the following risk factors
before purchasing the shares offered hereby.
The
following factors affect our business and the industry in which it operates.
The
risks and uncertainties described below are not the only ones we face.
Additional risks and uncertainties not presently known or that we currently
consider immaterial may also have an adverse effect on our business. If any
of
the matters discussed in the following risk factors were to occur, our business,
financial condition, results of operations, cash flows, or prospects could
be
materially adversely affected.
Risks
Related to Our Business
We
have a limited operating history and limited revenues.
Our
oil
and gas business commenced in August of 2005 and, accordingly, is subject to
substantial risks inherent in the commencement of a new business enterprise.
Consequently we have limited assets and operations. To date, we have generated
limited revenue from our operations., no business history and may not be able
to
successfully identify, develop and operate oil and gas leases, generate
revenues, or operate profitably that investors can analyze to aid them in making
an informed judgment as to the merits of an investment in us. Any investment
in
us should be considered a high risk investment because the investor will be
placing funds at risk in a company with unforeseen costs, expenses, competition,
and other problems to which new ventures are often subject. Investors should
not
purchase our stock unless they can afford to lose their entire investment.
We
will need additional capital to execute our business plan and
remain a going concern, and our ability to obtain the necessary funding
is uncertain.
We
expect
that we will require additional capital to implement our business plan
successfully. The timing and degree of any future capital requirements will
depend on many factors, including:
| · |
the
accuracy of the assumptions underlying our estimates for our capital
needs
in 2006;
|
| · |
the
number of prospects we identify;
|
| · |
the
terms on which we can obtain rights to those prospects;
|
| · |
the
cost of exploring and developing the prospects;
and
|
| · |
our
success rate in developing economically successful prospects.
|
We
have no
immediate internal sources of funds, and we do not have any committed sources
of
capital. Additional financing through partnering, public or private equity
financings, lease transactions or other financing sources may not be available
on acceptable terms, or at all. Additional equity financings could result in
significant dilution to our stockholders. If sufficient capital is not
available, we may be required to delay or reduce the scope of our exploration,
development and/or production activities which could have a material adverse
effect on our business and financial results and could result in our inability
to continue as a going concern.
2
Several
of our officers and directors are also officers and/or directors for another
company, which may lead to conflicts of interest for these officers and
directors.
Some
of our
officers and directors also serve as officers and or directors of Standard
Drilling, Inc., a company engaged in the business of drilling services.
Standard
Drilling’s management includes Mr. Prentis Tomlinson as CEO, Mr. Edward Moses
as
President and COO, and Mr. Oliver Pennington as CFO. Our management
includes Mr.
Tomlinson as Chairman, President and CEO, Mr. Moses as Vice Chairman,
and Mr.
Pennington as Chief Financial Officer. In addition, three of the five
members of
our Board of Directors, Messrs. Tomlinson, Moses and Anderson, serve
as
directors of Standard Drilling. Another one of our directors, Mr. Buntain,
is a
stockholder in Standard Drilling. In addition, our President and these
other
officers and directors directly or indirectly own approximately 37%
of our
outstanding common stock and approximately 34% of Standard Drilling
determined
in each case according to Rule 13D-3. As officers and/or directors
of both
companies, these individuals will have a duty of loyalty to both companies.
Although each company has other separate officers and staff, a conflict
of
interest may arise if we enter, or consider entering into any arrangements
with
Standard Drilling or if we and Standard Drilling engage, or attempt
to engage,
in the same businesses. We have entered into a Business Opportunity
Agreement
with Standard Drilling pursuant to which we disclaimed interest in
any future
drilling business opportunities, and Standard Drilling disclaimed interest
in
any future exploration and production business opportunities; this
agreement
clarifies the separate interests of these two entities and permits
those
officers and directors employed by both companies to manage the respective
businesses without concern that the interests described in the agreement
overlap. Nevertheless, transactions or other situations may arise in
which both
we and Standard Drilling are interested (such as opportunities for
Standard
Drilling to provide us with drilling services), and in such cases,
our officers
and directors in common might have conflicts of interest that would
prevent them
from making decisions or taking actions that are in our shareholders’ best
interests, and as a result our business and financial results could
be adversely
affected.
We
have entered into an agreement with Standard Drilling, Inc. pursuant
to which we
agreed to not enter into the oil field services businesses, and thus
we cannot
enter into or invest in any oil field services businesses.
We
have
entered into a Business Opportunity Agreement with Standard Drilling,
Inc.
pursuant to which we agreed to not acquire, invest in or operate any
oil field
services business and Standard Drilling, Inc. agreed to not acquire,
invest in
or operate any exploration or production business other than its currently
owned
oil and gas properties. Unless this agreement is amended, modified
or no longer
in effect, we cannot acquire or otherwise invest in any oil field service
business even if we believe such an acquisition or investment would
be
beneficial to us.
Our
conflicts committee consists of a single director and, in the event
of a
transaction or other circumstance involving Standard Drilling, the
committee
will not be able to rely on the unconflicted advice of much of our
senior
management, and if our single director resigns or is otherwise unable
to perform
his obligations as a director, we will not be able to take action on
a matter
involving conflicts for our remaining directors until either one or
more new
unconflicted directors are appointed or the Board takes action in the
absence of
unconflicted directors.
Mr.
Drouet
is our only director who is not director, officer or shareholder
of, or
otherwise affiliated with, Standard Drilling, and he does not constitute
a
majority of the Board of Directors. Mr. Drouet is the sole member
of our
conflicts committee, which is charged with determining all actions
that are
required to be taken or may be taken by us with respect to any opportunity
or
transaction that involves a conflict of interest for any officer
or director.
While the conflicts committee will have complete access to our management
and is
entitled to engage such outside engineering, financial, legal and
other
assistance as it deems appropriate, in the event of a transaction
or other
circumstance involving Standard Drilling the committee will not be
able to rely
on the unconflicted advice of much of our senior management. Further,
if Mr.
Drouet resigns or is otherwise unable to perform his obligations
as a director,
we will not be able to take action on any matters that are delegated
to the
conflicts committee until one or more new unconflicted directors
are appointed
and made members of the conflicts committee, or unless and until
the Board
determines to take action in the absence of any unconflicted directors,
relying
on its determination as to the fundamental fairness of the proposed
transaction
to our shareholders.
Employment
of some of our officers by another company may limit the time they have
available to devote to managing our business.
As noted above, several of our officers, including our President and CFO, are also employed as officers and/or directors of Standard Drilling. Standard Drilling pays the officers salaries comparable to, and in some cases greater than, the salaries we pay them. Currently, Standard Drilling pays Mr. Tomlinson and Mr. Moses $20,000 more per year than we pay them. Our employment agreements with these officers require them to devote such time to managing our business as is reasonably necessary to perform their duties under the employment agreement but do not specify a specific number of hours or percentage of time. Further, the officers have significant discretion on a day to day basis as to whether to devote time to the management of our business or management of Standard Drilling’s business. As a result of the salaries paid to them by, their fiduciary duties to, and their ownership of a substantial interest in, Standard Drilling, or for any other reason, the officers may determine to devote most or all of their time to Standard Drilling for an extended period of time. Because of the time required of these officers to manage Standard Drilling’s business, they may not devote sufficient time to managing our business, and as a result our business and financial results could be adversely affected. The supervision of the officers’ performance by directors without any conflict of interest regarding Standard Drilling is limited to the oversight provided by Mr. Drouet, unless one or more additional unconflicted directors are added to our Board in the future.
There
is a high demand for leases and drilling rigs in the areas of our operation
and
we may not be able to obtain leases or access to rigs at rates that permit
us to
be profitable or at all.
Increases
in
oil and natural gas prices have resulted in a significant increase in demand
for
both oil and gas leases and drilling rigs. As a result, the cost of both leases
and rigs has increased substantially. In particular the demand for rigs has
made
it difficult in some instances to obtain such services without significant
advance scheduling. If we cannot obtain leases to oil and gas properties and
rigs when needed and at reasonable rates, or at all, we may not be able to
complete exploration and development and commence production in a timely manner.
As a result, our associated costs could be substantially higher, we may lose
our
rights to some leases and our business and financial results may be adversely
affected.
We
will face intense competition in our industry, and we may not have the capacity
to compete with larger oil and gas companies also investing in oil and gas
prospects.
Identifying
and realizing attractive investments in the energy sector are highly
competitive, involve a high degree of uncertainty and often require significant
capital. There are many companies with more resources in the oil and gas
industry, competing to identify and acquire the most desirable oil and gas
prospects. If we cannot acquire high quality oil and gas prospects, at a cost
which allows us to earn a profit, due to such competition, our business and
financial results will be adversely affected.
The
selection of prospects, ownership and operation of oil and gas wells, and the
ownership of non-operating oil and gas properties are highly speculative
investments.
Prospects
may not produce oil or natural gas, or drilling or development on a prospect
may
not take place at all. Operations on the interests we acquire may be
unprofitable, not only because a well may be non-productive “dry hole,” but also
because the producing life and productivity of wells are unpredictable. Wells
may not produce oil and/or gas in sufficient quantities or quality to recoup
the
investment, let alone return a profit. Further, weather-related and other delays
may affect the ability to drill for hydrocarbons, produce hydrocarbons, or
to
transport hydrocarbons. Development and transportation may be made impracticable
or impossible by weather, ground conditions, inability to obtain appropriate
easements, ground water, or other conditions or delays. If any of our prospects
or wells fails to produce at anticipated levels or if their completion or
operation is delayed or limited, our business and financial results may be
adversely affected.
3
The
experts on whom we rely to analyze potential acquisitions may not make accurate
conclusions about prospects.
We
will
rely on our management and personnel, experts, our partners and other third
parties to analyze potential prospects in which we invest. If the analysis
is
inaccurate, the prospects may not result in productive wells and our business
and financial results will be adversely affected.
Third
parties may operate some of the prospects in which we invest
and
thus we may be unable to control their operations in a manner as we believe
will
yield the best results.
Third
parties manage and control the properties in which we invest. Also, third
parties may act as the operator of some of our prospects, and in most cases,
we
will acquire less than a 100% ownership position in our oil and gas properties.
Accordingly, third parties may manage and control the drilling, completion
and
production operations on the properties. As a result, a prospect may not be
drilled or operated in the manner we desire. Additionally, we could be held
liable for the joint activities of other working interest owners of our
investment properties, including nonpayment of costs and liabilities arising
from the other working interest owners’ actions. Moreover, if other working
interest owners do not, or cannot, pay their share of drilling and completion
costs for a prospect, that prospect might not be fully developed.
Leasehold
interests in which we invest may revert before the interest is profitable.
Many
leases and mineral interests contain provisions that allow ownership to revert
back to the original owners after a certain period of time and under certain
circumstances. Because we may not have control of the majority of the interest
in a particular lease block or because of a lack of funds or availability of
equipment, we will have little or no control over the development or drilling
that takes place, and leases may therefore expire before any commercialization
of the lease takes place.
Drilling
wells is speculative, unpredictable, and
we
will lose our entire investment in wells that do not produce in commercial
quantities.
We
will be
required to pay our pro rata share of drilling expenses on a prospect where
we
own a working interest. Drilling involves high risk, and the probability is
high
that no oil and gas will be discovered in commercial quantities. In most
instances for any given prospect, a dry hole will result in a total loss of
any
amounts invested in the drilling of the prospect, including the amount invested
in the mineral lease.
Production
and marketing conditions may cause production delays.
Some
of
the prospects we acquire may be remote from transportation facilities. Drilling
wells in areas remote from transportation facilities may delay production from
those wells until sufficient reserves are established to justify construction
of
necessary pipelines and production facilities. The inability to complete wells
in a timely fashion on a prospect may also result in production delays. In
addition, marketing demands (which have historically been seasonal) may reduce
or delay production from wells. The wells on the prospects in which we invest
may have access to only one potential market. Local conditions, including
closing businesses, conservation, shifting population, pipeline maximum
operating pressure constraints, local supply levels and delivery problems could
halt or reduce sales from the wells in which we invest. The occurrence of any
of
these adverse conditions may adversely affect our ability to produce and/or
market oil and gas from the affected wells.
4
Political
and economic instability in Iraq could aversely affect our investment in
projects in Iraq
We
have entered into an agreement to invest in an exploration and production
project in Iraq. Our investment in Iraq is subject to a variety of political
and
economic risks due in part to insurrection and instability in Iraq,
including:
| · |
loss
of property and equipment as a result of events like acts of
war,
insurrection, terrorism, expropriation, or
nationalization.
|
| · |
increases
in import, export and transportation regulations and tariffs,
taxes and
governmental royalties;
|
| · |
renegotiation
of contracts with governmental entities that result in
less favorable
terms for us;
|
|
·
|
changes
in laws and policies governing operations of foreign-based
companies in
Iraq that increase our costs or otherwise adversely
affect our
operations;
|
|
·
|
changes
in exchange controls and other laws that affect our ability
to transfer
funds to the United States;
|
| · |
changes
in the laws and policies of the United States affecting
foreign trade,
taxation and investment; and
|
| · |
the
possibility of being subject to the exclusive jurisdiction
of foreign
courts in connection with legal disputes and the possible inability
to
subject foreign persons to the jurisdiction of courts in the
United
States.
|
As
a result of any of the foregoing we may lose some or all of our investment
in
Iraq or control over the investment or its returns. Our business and financial
results would be adversely affected by any such event.
Oil
and gas markets have historically been unstable
and
their fluctuation may adversely affect the value and marketability of our
investments.
Global
economic conditions, political conditions and other factors create an unstable
market for the price of oil and natural gas. Oil and gas prices may fluctuate
significantly in response to supply, demand, political, economic, weather and
other factors. Such price fluctuation may affect the value of cash flow from
producing properties and the value and marketability of our investments.
We
may
not be able to be both cost-efficient and geographically diversified.
While
we
will diversify our investments among different properties, prospects, and,
possibly, geographic regions, the cost to acquire interests in and develop
oil
and gas prospects varies greatly in different geographic locations.
Consequently, if we make investments in a limited geographic area, it may lower
our cost per investment but would limit the diversity of our portfolio.
Conversely, if we make investments in a number of different areas, our diversity
would increase but at a greater cost to us.
The
profitability of any investment will be subject to the risk of loss due to
damage to people or property arising from the hazards of drilling and operating
prospects and wells.
We
intend
to invest in leaseholds, titles, mineral interests, working interests, royalty
interests and other energy exploration related assets. Numerous potential
hazards accompany the development of these interests, including unexpected
or
unusual ground formations, pressures, blowouts, and pollution. Any of these
hazards could injure or kill people or damage property, including causing
surface damages, equipment damage, reservoir damage and reserve loss. If any
of
these potential hazards occur, the associated damages could exceed the value
of
our assets and any insurance coverage.
Our
activities will be subject to substantial environmental laws and regulations
and
the cost of complying with those laws and regulations
may
be significant.
We
will be
subject to federal, state and local environmental laws, regulations and
ordinances that may impose liability for the costs of cleaning up, and damages
resulting from, past spills, disposals and other releases of hazardous
substances. In particular, under applicable environmental laws, we may be
responsible for certain costs associated with investigating and remediating
environmental conditions and may be subject to associated liability, including
lawsuits brought by private litigants, relating to prospects in which we own
working interests. These obligations could arise regardless of whether the
environmental conditions were created by us, a partner or by a prior owner
or
tenant. If we incur any such costs, our business and financial results may
be
adversely affected.
Risks
Related to Our Stock
There
is currently a limited market for our common stock, and any trading market
that
develops in the common stock may be highly illiquid and may not reflect the
underlying value of
our
net assets or business prospects.
There
is
currently a limited market for our common stock and an improved market for
our
common stock may not develop.. Accordingly, purchasers of the shares offered
hereby will be required to bear the economic consequences of holding such
securities for an indefinite period of time. An active trading market for our
common stock may not ever develop. Any trading market that does develop may
be
volatile, and significant competition to sell our common stock in any such
trading market may exist, which could negatively affect the price of our common
stock. As a result, the value of our common stock may decrease. Additionally,
if
a trading market does develop, such market may be highly illiquid, and our
common stock may trade at a price that does not accurately reflect the
underlying value of our net assets or business prospects. Investors are
cautioned not to rely on the possibility that an active trading market may
develop or on the prices at which our stock may trade in any market that does
develop in making an investment decision.
5
If
our
share price is volatile, we may be the target of securities litigation, which
is
costly and time-consuming to defend.
In
the
past, following periods of market volatility in the price of a company’s
securities, security holders have often instituted class action litigation.
If
the market value of our common stock experiences adverse fluctuations and we
become involved in this type of litigation, regardless of the outcome, we could
incur substantial legal costs and our management’s attention could be diverted
from the operation of our business, causing our business to suffer.
Our
“blank
check” preferred stock could be issued to prevent a business combination not
desired by management or our current majority shareholders.
Our
articles of incorporation authorize the issuance of “blank check” preferred
stock with such designations, rights and preferences as may be determined by
our
board of directors without shareholder approval. Our preferred stock could
be
utilized as a method of discouraging, delaying, or preventing a change in our
control and as a method of preventing shareholders from receiving a premium
for
their shares in connection with a change of control.
Future
sales of our common stock in the public market could lower our stock
price.
We
may
sell additional shares of common stock in subsequent public or private
offerings. We may also issue additional shares of common stock to finance future
acquisitions. Such sales or issuances may be at prices less than the public
trading price. We cannot predict the size of future issuances of our common
stock or the effect, if any, that future issuances and sales of shares of our
common stock will have on the market price of our common stock. Sales of
substantial amounts of our common stock (including shares issued in connection
with an acquisition), or the perception that such sales could occur, may
adversely affect prevailing market prices for our common stock.
We
presently do not intend to pay cash dividends on our common
stock.
We
currently anticipate that no cash dividends will be paid on the common stock
in
the foreseeable future. While our dividend policy will be based on the operating
results and capital needs of the business, it is anticipated that all earnings,
if any, will be retained to finance the future expansion of the our business.
Therefore, prospective investors who anticipate the need for immediate income
by
way of cash dividends from their investment should not purchase the shares
offered in this offering.
This
Prospectus contains forward-looking statements. These statements relate to
future events and/or future financial performance and involve known and unknown
risks, uncertainties and other factors that may cause the actual results, levels
of activity, performance or achievements of our business or the industry in
which it operates to be materially different from any future results, levels
of
activity, performance or achievements expressed or implied by the
forward-looking statements. These risks and other factors include those listed
under “Risk Factors” and those described elsewhere in this
prospectus.
In
some
cases, you can identify forward-looking statements by the Company’s use of terms
such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential,” or the negative of these terms or other
comparable terminology. These statements are only predictions. Actual events
or
results may differ materially. In evaluating these statements, you should
specifically consider various factors, including the risks outlined under “Risk
Factors.” These factors may cause the Company’s actual results to differ
materially from any forward-looking statement.
Although
we believe that the expectations reflected in the forward-looking statements
are
reasonable, we cannot guarantee future results, levels of activity, performance,
or achievements. Moreover, neither we nor any other person assumes
responsibility for the accuracy and completeness of these forward-looking
statements. We do not intend to update any of the forward-looking statements
after the date of this Prospectus to conform prior statements to actual
results.
7
The
selling stockholders will receive all of the proceeds from any sales of shares
of our common stock. We will not receive any of the proceeds from any such
sale
by any selling stockholder. See “Selling Stockholders.”
We
will
receive proceeds upon the exercise of the warrants. Any proceeds we receive
upon
exercise of the warrants will be used for evaluating, acquiring, drilling and
completing prospects and to pay salary and administrative expenses.
Shares
of
our common stock are traded on the National Association of Securities Dealers
Inc. Over the Counter Bulletin Board under the symbol “CBRE.OB.” Our common
stock trades on a limited, sporadic and volatile basis. As of January 12,
2007, the last reported sales price of our common stock on the OTC Bulletin
Board was $2.25. As of January 12, 2007, there were 62,350,806 shares of
our common stock outstanding that were held of record by 405
persons.
The
following table sets forth, for the periods indicated, the range of high and
low
bid information for our common stock. These quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not represent
actual transactions.
|
Price
Ranges
|
|||||||
|
High
|
Low
|
||||||
|
Fiscal
Year Ended December 31, 2003
|
|||||||
|
First
Quarter
|
0
|
0
|
|||||
|
Second
Quarter
|
0
|
0
|
|||||
|
Third
Quarter
|
0
|
0
|
|||||
|
Fourth
Quarter
|
0
|
0
|
|||||
|
Fiscal
Year Ended December 31, 2004
|
|||||||
|
First
Quarter
|
0
|
0
|
|||||
|
Second
Quarter
|
0
|
0
|
|||||
|
Third
Quarter
|
0
|
0
|
|||||
|
Fourth
Quarter
|
0
|
0
|
|||||
|
Fiscal
Year Ended December 31, 2005
|
|||||||
|
First
Quarter
|
0
|
0
|
|||||
|
Second
Quarter
|
0
|
0
|
|||||
|
Third
Quarter
|
0
|
0
|
|||||
|
Fourth
Quarter
|
2.00
|
1.42
|
|||||
|
Fiscal
Year Ended December 31, 2006
|
|||||||
|
First
Quarter
|
3.00
|
1.55
|
|||||
|
Second
Quarter
|
2.90
|
1.80
|
|||||
|
Third
Quarter
|
2.80
|
1.81
|
|||||
|
Fourth
Quarter
|
2.79 | 2.00 | |||||
| Fiscal Year Ended December 31, 2007 | |||||||
| First Quarter (through January 12, 2007) | 2.79 | 2.15 | |||||
Holders
of
shares of common stock will be entitled to receive cash dividends when, as
and
if declared by our Board of Directors, out of funds legally available for
payment thereof. However, if dividends are not declared by our Board of
Directors, no dividends shall be paid. We have not paid any dividends on our
common stock since our inception.
We
do not
anticipate that any cash dividends will be paid in the foreseeable future.
While
our dividend policy will be based on the operating results and capital needs
of
the business, we anticipate that all earnings, if any, will be retained to
finance our future expansion. Therefore, prospective investors who anticipate
the need for immediate income by way of cash dividends from their investment
should not purchase the shares offered by this prospectus.
8
OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The
following discussion of our financial condition and results of operations should
be read together with the consolidated financial statements and related notes
that are included elsewhere in this prospectus. This discussion may contain
forward-looking statements based upon current expectations that involve risks
and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those set forth under “Risk Factors,” “Disclosure Regarding
Forward-Looking Statements” or in other parts of this prospectus. We undertake
no obligation to update any information in our forward-looking statements except
as required by law.
Overview
We
are
engaged in oil and natural gas exploration and exploitation activities in the
Barnett Shale development in Ft. Worth Basin located northern Texas, the Bakkan
Shale development in the Williston Basin located in Montana and North Dakota,
and the Fayetteville Shale development in the Arkoma Basin located in Arkansas.
We have a limited operating history as our predecessor company for financial
reporting purposes was formed on August 17, 2005. We are engaged in the
acquisition, exploitation and development of producing and non-producing oil
and
gas-shale (source rock) properties in selected producing basins in North
America. Our oil and gas business was commenced in August 2005. Most of our
current activities are focused on the exploration and production of natural
gas
in the Barnett Shale development in Northern Texas and the Fayetteville Shale
development in Arkansas.
Our
current goals are to expand and develop our exploration and production business
and our reserves by initially emphasizing the identification and development
of
shale gas opportunities in the Barnett Shale and the Fayetteville Shale. We
believe both the Mississippian development of the Barnett Shale in the Ft.
Worth
Basin and the Fayetteville Shale development in the Arkoma Basin provides the
greatest near term economic value to us.
We
evaluate opportunities to purchase or sell oil and natural gas properties in
the
marketplace and could participate as a buyer or seller of properties at various
times. We seek acquisitions that utilize our technical expertise or offer
opportunities to expand our existing core areas.
Acquisition,
exploration and development.
We
follow
the full cost method of accounting for oil and gas properties. Accordingly,
all
costs associated with acquisition, exploration, and development of oil and
gas
reserves, including directly related overhead costs and related asset retirement
costs, are capitalized.
General
and administrative.
General
and administrative expenses consist primarily of salaries and benefits, office
expense, professional services fees, and other corporate overhead costs. We
anticipate increases in general and administrative expenses as we continue
to
increase our staff to expand our operations.
9
Results
of Operations
We
commenced our oil and gas operations in August 2005. Prior to that time we
did
not have any significant activities or assets. Consequently, we are not able
to
compare results of operations for the quarter ended June 30, 2006, for the
quarter ended March 31, 2006 or the period ended December 31, 2005 to any
earlier period.
Selected
Financial History
|
Nine
months ended September 30, 2006
(Unaudited)
|
Six
months ended June 30, 2006
(Unaudited)
|
Three
months ended March 31, 2006
(Unaudited)
|
August
17 (inception) - December 31,
2005
(Audited)
|
||||||||||
|
Oil
and Gas Revenue
|
375,161
|
129,899
|
39,342
|
20,778
|
|||||||||
|
Loss
from operations
|
(2,156,140
|
)
|
(1,328,295
|
)
|
(697,726
|
)
|
(1,943,885
|
)
|
|||||
|
Net
loss
|
(2,064,909
|
)
|
(1,260,633
|
)
|
($673,612
|
)
|
(1,901,651
|
)
|
|||||
|
Earnings
per share:
|
|||||||||||||
|
Basic
and diluted
|
(0.04
|
)
|
(0.02
|
)
|
(0.01
|
)
|
(0.05
|
)
|
|||||
|
|
|||||||||||||
|
Total
assets
|
22,503,427
|
18,794,006
|
13,498,242
|
7,938,869
|
|||||||||
|
Total
long-term liabilities
|
─
|
─
|
─
|
─
|
|||||||||
|
Total
liabilities
|
2,212,306
|
2,531,836
|
1,474,102
|
1,065,964
|
|||||||||
|
Common
stock; $.001 par value; 100,000,000 authorized; 56,600,806,
53,980,806,
and 47,000,000 issued and outstanding
|
58,351
|
56,601
|
53,981
|
47,000
|
|||||||||
|
Preferred
stock; $.001 par value; 10,000,000 authorized; none issued
|
─
|
─
|
─
|
─
|
|||||||||
|
Dividends
declared per common share
|
|
|
─
|
─
|
|||||||||
Results
of Operations for Nine Months Period Ended September 30,
2006
We
commenced our oil and gas operations in August 2005. Prior to that
time, we did
not have any significant activities or assets. Consequently, we are
not able to
compare results of operations for the nine months ended September
30, 2006 to
any earlier period.
Net
Sales
For
the
nine months ended September 30, 2006, our oil and gas net sales were
$375,161.
Sales revenues were derived primarily from the sale of gas production
of 67,671
Mcf at an average price of $5.60 per Mcf. At the beginning of the
period, we had
five wells on production and during the period, seven new wells began
commercial production. We are still in the operational development
stage of our
exploration program. Accordingly, we do not expect to generate substantial
revenues during the majority of 2006 until the completion of the
initial stages
of our drilling program.
General
and Administrative Expenses
For
the
nine months ended September 30, 2006, general and administrative
expenses were
$1,872,724. A total of $156,607 was for costs associated with our
general and
administrative expenses, $860,896 was for professional fees principally
associated with capital raising activities, and $855,221 was for
compensation
expense.
Net
Loss
For
the
nine months ended September 30, 2006, we had a net loss of $2,064,909.
The net
loss is primarily attributable to minimal operating revenues to support
general
and administrative costs until such time as we achieve more substantial
operating results from our drilling program.
Results
of Operations for Three Months Period Ended September 30,
2006
We
commenced our oil and gas operations in August 2005. Prior to that
time, we did
not have any significant activities or assets. During the period
from August 17,
2005 (Inception) until September 30, 2005, our operations were very
limited. Consequently, comparisions between results of operations for
the three months ended September 30, 2006 and the period from August
17,
2005 (Inception) until September 30, 2005 are limited.
Net
Sales
For
the
three months ended September 30, 2006, our oil and gas net sales
were $245,262.
Seven additional wells began producing during the period which resulted
in an
increased revenue rate in the three month period ending September
30, 2006.
Although we have expanded our operations significantly in
comparison to the the period from August 17, 2005 (Inception) until
September 30, 2005, we are still in the operational development stage
of our
exploration program. Accordingly, we do not expect to generate substantial
revenues during the majority of 2006 until the completion of the
initial stages
of our drilling program.
General
and Administrative Expenses
For
the
three months ended September 30, 2006, general and administrative
expenses were
$526,501. We incurred costs associated with our continuing general
and
administrative expense of $136,279, were paid $175,288 by Standard
Drilling,
Inc. pursuant to a shared services agreement for service rendered
since February
14, 2006. $243,699 was for professional fees principally associated
with capital
raising activities, and $321,810 was for salaries and wages for employees.
During the period, we reimbursed shared costs associated with the
shared
services agreement put into place during the quarter with Standard
Drilling,
Inc. with whom we share office space and secretarial services in
Washington,
D.C. Also, we continued incur higher professional expenses as a result
of higher
third party investor relation fees and higher legal and accounting
fees due to
the preparation and filing of our registration statement on Form
SB-2 with the
Securities and Exchange Commission. During the three months ended
September 30,
2006, we incurred significantly higher general and administrative
expenses in comparison to the the period from August 17, 2005 (Inception)
until September 30, 2005. We have added operational and financial
personnel and have increased our business activity.
Net
Loss
For
the
three months ended September 30, 2006, we had a net loss of $804,274.
The net
loss is primarily attributable to minimal operating revenues to support
general
and administrative costs until such time as we achieve operating
results from
our drilling program. During the period from August 17, 2005 (Inception)
until September 30, 2005, we incurred compensation expense for option
granted to
founders, executive and directors which we did not incur in the the
three months
ended September 30, 2006. As a result, our net loss was
lower.
Liquidity
and Capital Resources
As
of
September 30, 2006, we had cash of $3,409,807 and working capital
of $1,756,731.
We expect to have monthly overhead costs of approximately $200,000
per month for
the next twelve months. Since our inception, our primary sources
of liquidity
have been generated by the sale of equity securities. To date, the
net proceeds
from the sales of securities have been used to fund our exploration
programs and
our general and administrative costs including substantial costs
for the
registration of our securities. Our future liquidity and our liquidity
in the
next twelve months depend on the success of our exploration programs
and our
continued ability to obtain sources of capital to fund our continuing
development.
On
October
31, 2005, we raised an aggregate of $8,000,000 ($7,243,056 net of
offering
costs) through the sale of 20,000,000 shares of common stock and
warrants to
purchase 10,000,000 shares of common stock at an exercise price of
$0.75 per
share and a term of 2 years. As of September 30, 2006, 400,000 warrants
to
purchase our common stock have been exercised on a cashless basis.
In
March
and April 2006, we raised an aggregate of $11,560,000 ($10,629,394
net of
offering costs) through the sale of 5,780,000 shares of common stock
and
warrants to purchase 5,780,000 shares of common stock at an exercise
price of
$2.75 per share and a term of 2 years.
On
October
31, 2006 we raised an aggregate of $4,812,500 ($4,812,500 net of
offering costs)
through the sale of warrants to purchase 1,000,000 shares of common stock
at a price of $1.50 per share and warrants to purchase 1,000,000
shares of
common stock at a price of $.001 per share in exchange for the cash
raised plus
the investor’s surrender of a warrant to purchase 1,750,000 shares at a price
of
$2.75 per share. The terms of these warrants are described in this
prospectus
under the heading “Description of Securities.”
Cash
flow from operating
activities
For
the
nine month period ended September 30, 2006, net cash used in operating
activities was $2,000,680 primarily attributed to a net loss of $2,064,909
in
the period.
Cash
flow from investing activities
For
the
nine month period ending September 30, 2006, net cash used in investing
activities was $12,137,158, driven primarily by our investment in
oil and gas
properties in the Ft. Worth Basin, an initial investment in properties
in the
Arkoma Basin and in the Bina-Bawi project.
Cash
flow from financing activities
For
the
nine month period ending September 30, 2006, net cash provided by
financing
activities was $15,441,896, which was attributed to our sale of common
stock and
purchase warrants.
Results
of Operations
for Six Months Period Ended June 30, 2006
We
commenced our oil and gas operations in August 2005. Prior to that time we
did
not have any significant activities or assets. Consequently, we are not able
to
compare results of operations for the six months ended June 30, 2006 to any
earlier period.
Net
Sales.
For
the
six months ended June 30, 2006, our oil and gas net sales were $129,899.
During
the majority of the period, we had only two wells on production. However,
at the
end of the period, three new wells started commercial production. We are
still
in the operational development stage of our exploration program. Accordingly,
we
do not expect to generate substantial revenues during the majority of 2006
until
the completion of the initial stages of our drilling program.
General
and Administrative Expenses.
10
For
the
six months ended June 30, 2006, general and administrative expenses were
$1,346,222. A total of $315,132 was for costs associated with our general
and
administrative expenses, $420,810 was for professional fees principally
associated with capital raising activities, and $610,280 was for compensation
expense.
Net
Loss.
For
the
six months ended June 30, 2006, we had a net loss of $1,260,633. The net
loss is
primarily attributable to minimal operating revenues to support general and
administrative costs until such time as we achieve operating results from
our
drilling program.
Results
of Operations for Three Months Period Ended June 30, 2006
We
commenced our oil and gas operations in August 2005. Prior to that time we
did
not have any significant activities or assets. Consequently, we are not able
to
compare results of operations for the three months ended June 30, 2006 to
any
earlier period.
Net
Sales.
For
the
three months ended June 30, 2006, our oil and gas net sales were $90,761.
Three
additional wells began producing at the end of period which resulted in an
increased revenue rate in the three month period ending June 30, 2006. We
are
still in the operational development stage of our exploration program.
Accordingly, we do not expect to generate substantial revenues during the
majority of 2006 until the completion of the initial stages of our drilling
program.
General
and Administrative Expenses.
For
the
three months ended June 30, 2006, general and administrative expenses were
$641,060. A total of $171,086 was for costs associated with our continuing
general and administrative expense, $219,245 was for professional fees
principally associated with capital raising activities, and $250,729 was
for
compensation expense for employees. During the period, we incurred higher
professional expenses as a result of higher third party investor relation
fees
and higher legal and accounting fees due to the preparation and filing of
our
registration statement on Form SB-2 with the Securities and Exchange Commission.
Net
Loss.
For
the
three months ended June 30, 2006, we had a net loss $587,020. Lower compensation
expense and a slight improvement in revenues reduced the loss rate versus
the
prior period. The net loss is primarily attributable to minimal operating
revenues to support general and administrative costs until such time as we
achieve operating results from our drilling program.
Liquidity
and Capital Resources
As
of June
30, 2006, we had cash of $4,649,432 and working capital of $2,235,623. We
expect
to have monthly overhead costs of approximately $200,000 per month for the
next
twelve months. Since our inception, our primary sources of liquidity have
been
generated by the sale of equity securities (including the issuance of securities
in exchange for goods and services to third parties and to pay costs of
employees). To date, the net proceeds from the sales of securities have been
used to fund our exploration programs and our general and administrative
costs
including substantial costs for the registration of our securities. Our future
liquidity and our liquidity in the next twelve months depend on the success
of
our exploration programs and our continued ability to obtain sources of capital
to fund our continuing development.
11
On
October
31, 2005, we raised an aggregate of $8,000,000 ($7,243,056 net of offering
costs) through the sale of 20,000,000 shares of common stock and warrants
to
purchase 10,000,000 shares of common stock at an exercise price of $0.75
and a
term of 2 years. As of June 30, 2006, 400,000 warrants to purchase our common
stock have been exercised on a cashless basis.
In
March
and April 2006, we raised an aggregate of $11,560,000 ($10,629,394 net of
offering costs) through the sale of 5,780,000 shares of common stock and
warrants to purchase 5,780,000 shares of common stock at an exercise price
of
$2.75 and a term of 2 years.
Cash
flow from operating activities
For
the
six month period ended June 30, 2006, cash flow from operating activities
was
$308,594 primarily attributed to a net loss of $1,260,633 in the period
offset
by an increase in accounts payable of $1,433,603.
Cash
flow from investing activities
For
the
six month period ended June 30, 2006, net cash used in investing activities
was
$8,394,305, driven primarily by our investment in oil and gas properties
in the
Ft. Worth Basin and an initial investment in properties in the Arkhoma
Basin.
Cash
flow from financing activities
For
the
six month period ended June 30, 2006, net cash provided by financing
activities
was $10,629,394, which was attributed to our sale of common stock and
purchase
warrants. At June 30, 2006, Calibre had received net proceeds from stock
issuances of $10,629,394 (gross proceeds of $11,560,000 less $930,606
of
offering costs).
Related
Party Transactions
We
are
party to a letter agreement with Kerogen Resources pursuant to which we are
participating in the Reichmann project. During the six month period ending
June
30, 2006, pursuant to such agreement we have paid $3,068,182 to Kerogen,
including $1,706,539 in the three month period ending June 30, 2006. Kerogen
then paid such amount to Reichmann Petroleum Corporation as reimbursement
of
operating expenses.
We
have
entered into a Participation Agreement with Kerogen Resources for the
exploration and development of prospects in the South Fort Worth Basin. Pursuant
to this agreement we are obligated to pay Kerogen Resources $597,000 for
its
identification of prospects; we have paid Kerogen Resources $500,000 of such
amount to date, although no payments were made in the six months ending June
30,
2006 under this agreement. Additionally, during the six month period, we
have
advanced $1,184,154 to Kerogen for participation in leases in the Hill County
area of Texas, including $517,517 in the three months ending June 30, 2006.
We
have
entered into a Participation Agreement with Kerogen Resources for the
exploration and development of prospects in the Williston Basin. Pursuant
to
this agreement we are obligated to pay Kerogen Resources $638,600 for its
identification of prospects; we have paid Kerogen Resources $550,000 of such
amount to date. However, we made no payments to Kerogen during the six months
ending June 30, 2006 in respect to this agreement.
12
We
believe
all of the transactions with related parties have been on terms no less
favorable to us than those terms which may have been obtained from unrelated
third parties.
Quarter
Ended March 31, 2006
Oil
and Gas Revenues.
For
the
quarter ended March 31, 2006, our oil and gas sales were $39,342, the majority
of it coming from our first two producing wells in the Reichmann project. Oil
and gas revenues are derived from our proportionate share of working interests
in oil and gas properties.
General
and Administrative Expenses.
For
the
three months ended March 31, 2006, general and administrative expenses
were
$713,440. A total of $311,866 was for actual costs associated with our
general
and administrative expense, $246,568 was for professional fees, $155,006
was for compensation expense.
Net
loss.
For
the
three months ended March 31, 2006, we had a net loss of $673,612 or ($0.01)
per
share (basic and diluted). The net loss is primarily attributable to minimal
operating revenues to support general and administrative costs until such time
as we achieve operating results from our drilling program.
Liquidity
and Capital Resources
As
of
March 31, 2006, we had cash of $4,308,654 and working capital of $3,230,269.
Since our inception, our primary sources of liquidity have been generated by
the
sale of equity securities (including the issuance of securities in exchange
for
goods and services to third parties and to pay costs of employees). To date,
the
net proceeds from the sales of securities have been used to fund our exploration
programs and our general and administrative costs. Our future liquidity depends
on the success of our exploration programs and our continued ability to obtain
sources of capital to fund our continuing development.
On
October
31, 2005, we raised an aggregate of $8,000,000 ($7,243,056 net of offering
costs) through the sale of 20,000,000 shares of common stock and warrants to
purchase 10,000,000 shares of common stock at an exercise price of $0.75 and
a
term of 2 years. As of March 31, 2006, 400,000 warrants to purchase our common
stock have been exercised.
In
March
and April 2006, we raised an aggregate of $11,560,000 ($10,668,000 net of
offering costs) through the sale of 5,780,000 shares of common stock and
warrants to purchase 5,780,000 shares of common stock at an exercise price
of
$2.75 and a term of 2 years.
Cash
flow from operating activities
For
the
three month period ending March 31, 2006 cash provided by (used in) operating
activities was (141,946), primarily attributed to a net loss of $673,612 in
the
period and to an increase in accounts payable of $397,885.
13
Cash
flow from investing activities
For
the
three month period ending March 31, 2006, net cash provided by (used in)
investing activities was ($3,469,743), driven primarily by our investment in
oil
and gas properties in the Ft. Worth Basin.
Cash
flow from financing activities
For
the
three month period ending March 31, 2006, net cash provided by (used in)
financing activities was $5,814,594, which was attributed to our sale of common
stock and purchase warrants. At March 31, 2006, Calibre had received net
proceeds from stock issuances of $5,814,594 (gross proceeds of $6,320,000 less
$505,406 of offering costs).
Period
Ended December 31, 2005
Oil
and Gas Revenues.
For
the
period from inception (August 17, 2005) to December 31, 2005 our oil and gas
net
sales were $20,778, Oil and gas revenues are derived from our proportionate
share of working interests in oil and gas properties.
General
and Administrative Expenses.
For
the
period from inception (August 17, 2005) to December 31, 2005 general and
administrative expenses were $1,893,602. A total of $273,585 was for actual
costs associated with our general and administrative expense,
$115,517
was for salary and wages for employees,
and
$1,504,500 since inception was a non-cash compensation expense associated with
stock and options granted to our founders and management who we believe are
key
to the development of our business.
Net
loss.
For
the
period from inception (August 17, 2005) to December 31, 2005, we had a net
loss
for the year ended December 31, 2005, of $1,901,651 or ($0.05) per share (basic
and diluted).
Liquidity
and Capital Resources
Since
our
inception, our primary sources of liquidity have been generated by the sale
of
equity securities (including the issuance of securities in exchange for goods
and services to third parties and to pay costs of employees).
On
October
31, 2005, we raised an aggregate of $8,000,000 ($7,243,056 net of offering
costs) through the sale of 20,000,000 shares of common stock and warrants to
purchase 10,000,000 shares of common stock at an exercise price of $0.75. The
terms of the warrants are described in this prospectus under “Description of
Securities.” As of June 15, 2006, 400,000 warrants to purchase our common stock
have been exercised. As of December 31, 2005, we had cash of $2,105,749. In
March and April 2006, we raised an aggregate of $11,560,000 ($10,668,000 net
of
offering costs) through the sale of 5,780,000 shares of common stock and
warrants to purchase 5,780,000 shares of common stock at an exercise price
of
$2.75. The terms of the Warrants are described in this prospectus under
“Description of Securities.”
14
Cash
flow from operating activities
For
the
period from August 17, 2005 to December 31, 2005, cash provided by operating
activities was 566,352 which consists of our net loss of $1,901,651, the
adjustment to for the non-cash expense of stock options granted for services
and
an increase in accounts payable of $1,045,482.
Cash
flow from investing activities
For
the
period from August 17, 2005 to December 31, 2005, net cash provided by investing
activities was ($5,730,659), driven primarily by our investment in oil and
gas
properties in the Ft. Worth Basin.
Cash
flow from financing activities
For
the
period from August 17, 2005 to December 31, 2005, net cash provided by financing
activities was $7,270,056, which was attributed to our sale of common stock
and
purchase warrants. On
October
31, 2005, we raised an aggregate of $8,000,000 ($7,243,056 net of offering
costs) through the sale of 20,000,000 shares of common stock and warrants to
purchase 10,000,000 shares of common stock at an exercise price of $0.75.
Future
capital expenditures and commitments
Expenditures
for exploration and development of oil and natural gas properties and lands
costs related to the acquisition of non-producing leasehold are the primary
use
of our capital resources. Our budgeted capital and exploration and development
expenditures are expected to be approximately $19.5 million in 2006 as follows
(in millions):
|
|
Amount
|
|||
|
General
& Administrative and Capital Costs
|
$
|
3.0
|
||
|
Exploration
& development drilling
|
9.5
|
|||
|
Land
costs
|
6.5
|
|||
|
Seismic
|
.5
|
|||
|
Total
|
$
|
19.5
|
As
of
August 15, 2006, we believe that our remaining cash balance and revenues
from
existing projects will be sufficient to cover our current liabilities,
obligations and contractual commitments for 2006 but will not be sufficient
to
fund all budgeted development and drilling of our existing projects, or to
fund
the acquisition of all budgeted land costs, as discussed above in our 2006
capital budget. We will need to raise additional capital through the sale
of
equity and/or debt securities to fully meet our 2006 capital budget. Failure
to
raise necessary capital or generate sufficient cash flow from operations
in 2006
will cause us to curtail or eliminate certain development and drilling of
existing and planned projects as well as a curtail the acquisition of land
costs
as highlighted in our 2006 capital budget.
As
a
result, the actual amount and timing of our capital expenditures may differ
materially from our estimates. Some of the other factors which may prevent
us
from meeting our 2006 capital budget are among other things, actual drilling
results, cost overruns, the availability of drilling rigs and other services
and
equipment, regulatory, technological and competitive developments, and all
such
other assumptions referenced in this report.
15
Hedging
We
did not
hedge any of our oil or natural gas production during 2005 and have not entered
into any such hedges from January 1, 2006 through the date of this
filing.
Contractual
Commitments
|
|
|
Payments
Due By Period
|
|||||||||||
|
|
Total
|
Less
Than 1 Year
|
1-3
Years
|
3-5
Years
|
|||||||||
|
Contractual
Obligations
|
|||||||||||||
|
Operating
Lease
|
|||||||||||||
|
Contract
Obligations
|
$
|
522,817
|
$
|
190,257
|
$
|
195,253
|
$
|
137,307
|
|||||
|
Drilling
Wells in Progress
|
$
|
3,490,000
|
$
|
3,490,000
|
|
||||||||
|
Total
|
$
|
4,012,817
|
$
|
3,680,257
|
$
|
195,253
|
$
|
137,307
|
|||||
As
of
August 1, 2006, all of our drilling well obligations are associated with the
Reichmann Petroleum project. Our contract obligations are associated with our
office leases in Washington, D.C. and Houston, TX. We
had no
long-term debt obligations, capital lease obligations, purchase obligations
or
other long-term liabilities reflected on the balance sheet.
Off-Balance
Sheet Arrangements
As
of June
15, 2006, we had no off-balance sheet arrangements.
Related
Party Transactions
For
more
information on these transactions, please read “Certain Relationships and
Related Party Transactions” in this prospectus.
Critical
Accounting Policies
Our
discussion and analysis of our financial condition and results of operations
is
based on our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities and expenses.
We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
may
differ from these estimates under different assumptions or conditions. We
believe the following critical accounting policies affect our most significant
judgments and estimates used in preparation of our consolidated financial
statements.
Reverse
Acquisition.
We
treated the merger of Calibre Energy, Inc., a Delaware corporation, into a
subsidiary of Hardwood Doors and Milling Specialties, Inc. as a reverse
acquisition. Pursuant to the guidance in Appendix B of SEC Accounting Disclosure
Rules and Practices Official Text, the “merger of a private operating company
into a non-operating public shell corporation with nominal net assets typically
results in the owners and management of the private company having actual or
effective operating control of the combined company after the transaction,
with
the shareholders of the former public shell continuing only as passive
investors. These transactions are considered by the staff to be capital
transactions in substance, rather than business combinations. That is, the
16
transaction
is equivalent to the issuance of stock by the private company for the net
monetary assets of the shell corporation, accompanied by a recapitalization.”
Accordingly, the reverse acquisition has been accounted for as a
recapitalization. For accounting purposes, the original Calibre Energy, Inc.
is
considered the acquirer in the reverse acquisition. The historical financial
statements are those of the original Calibre Energy, Inc. Earnings per share
for
periods prior to the merger are restated to reflect the number of equivalent
shares received by the acquiring company.
Revenue
recognition. We derive substantially all of our revenues from the sale of
oil and natural gas. Oil and gas revenues are recorded in the month the product
is delivered to the purchaser and title transfers. We generally receive payment
from one to three months after the sale has occurred. Each month revenues
are recognized based on the actual volumes of gas and sold to purchasers.
Variances between estimated revenue and actual amounts are recorded in the
month
payment is received.
Oil
and Gas Properties.
We
follow the full cost method of accounting for oil and gas properties.
Accordingly, all costs associated with acquisition, exploration, and development
of oil and gas reserves, including directly related overhead costs and related
asset retirement costs, are capitalized.
All
capitalized costs of oil and gas properties, including the estimated future
costs to develop proved reserves, are amortized on the unit-of-production
method
using estimates of proved reserves. Investments in unproved properties and
major
development projects in progress are not amortized until proved reserves
associated with the projects can be determined and are periodically assessed
for
impairment. If the results of an assessment indicate that the properties
are
impaired, such impairment is added to the costs being amortized and is subject
to the ceiling test.
Sales
of
proved and unproved properties are accounted for as adjustments of capitalized
costs with no gain or loss recognized, unless such adjustments would
significantly alter the relationship between capitalized costs and proved
reserves of oil and gas, in which case the gain or loss is recognized in
income.
Abandonments
of properties are accounted for as adjustments of capitalized costs with no
loss
recognized.
Oil
and Gas Properties Not Subject to Amortization.
We are
currently participating in oil and gas exploration and development activities.
As of December 31, 2005, substantially all of our activities are in a
preliminary exploration and drilling stage. Upon completion of development
of
each property, we make an estimate of proved producing reserves associated
with
such property. Until such time, property, development and exploratory costs
are
excluded in computing amortization.
Calibre
is
currently participating in oil and gas exploration and development activities.
At December 31, 2005, a determination could not be made about the extent of
oil
reserves that should be classified as proved reserves. Consequently, all the
property, development and exploratory costs have been excluded in computing
amortization. Calibre will begin to amortize these costs when these projects
are
evaluated, which is currently estimated to be at the end of 2006
17
Depreciation,
depletion and amortization, or DD&A, of capitalized drilling and development
costs of oil and natural gas properties are generally computed using the unit
of
production method on an individual property or unit basis based on total
estimated proved developed oil and natural gas reserves. Amortization of
producing leasehold is based on the unit-of-production method using total
estimated proved reserves. In arriving at rates under the unit-of-production
method, the quantities of recoverable oil and natural gas are established based
on estimates made by our geologists and engineers and independent engineers.
Service properties, equipment and other assets are depreciated using the
straight-line method over estimated useful lives of 5 to 40 years. Upon sale
or
retirement of depreciable or depletable property, the cost and related
accumulated DD&A are eliminated from the accounts and the resulting gain or
loss is recognized.
Non-producing
properties consist of undeveloped leasehold costs and costs associated with
the
purchase of certain proved undeveloped reserves. Undeveloped leasehold cost
is
expensed over the life of the lease or transferred to the associated producing
properties. Individually significant non-producing properties are periodically
assessed for impairment of value and a loss is recognized.
Oil
and natural gas reserves and standardized measure of future cash
flows.
Our
independent engineers and technical staff prepare the estimates of our oil
and
natural gas reserves and associated future net cash flows. Current accounting
guidance allows only proved oil and natural gas reserves to be included in
our
financial statement disclosures. The SEC has defined proved reserves as the
estimated quantities of crude oil and natural gas which geological and
engineering data demonstrate with reasonable certainty to be recoverable in
future years from known reservoirs under existing economic and operating
conditions. Even though our independent engineers and technical staff are
knowledgeable and follow authoritative guidelines for estimating reserves,
they
must make a number of subjective assumptions based on professional judgments
in
developing the reserve estimates. Reserve estimates are updated at least
annually and consider recent production levels and other technical information
about each field. Periodic revisions to the estimated reserves and future cash
flows may be necessary as a result of a number of factors, including reservoir
performance, new drilling, oil and natural gas prices and cost changes,
technological advances, new geological or geophysical data, or other economic
factors. We cannot predict the amounts or timing of future reserve revisions.
If
such revisions are significant, they could significantly alter future DD&A
and result in impairment of assets that may be material.
Impairment
of Long-Lived Assets.
We
review long-lived assets and certain identifiable assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset
may not be recoverable. If the sum of the expected future undiscounted cash
flows is less than the carrying amount of the asset, further impairment analysis
is performed. An impairment loss is measured as the amount by which the carrying
amount exceeds the fair value of assets.
Employee
Stock Plan.
In
December 2004, the FASB issued SFAS No.123R, “Accounting for Stock-Based
Compensation” (“SFAS No. 123R”). SFAS No.123R establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services. This Statement focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions. SFAS No.123R requires that the fair value of such equity
instruments be recognized as
expense
in the historical financial statements as services are performed. Prior to
SFAS
No.123R, only certain pro forma disclosures of fair value were required. SFAS
No.123R shall be effective for small business issuers as of the beginning of
the
first interim or annual reporting period that begins after December 15, 2005.
Calibre will adopt SFAS No. 123R as of January 1, 2006.
We
have a
stock-based compensation plan, which is described more fully in Note 6. As
permitted under generally accepted accounting principles, we account for the
plan under the recognition and measurement principles of APB Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations.
Accordingly, stock-based employee compensation cost has been recognized, as
all
options granted under the plan had an exercise price less than the market value
of the underlying common stock on the date of
18
grant,
see
note 5 for more information. There would be minimal effect on the net loss
had
compensation cost for the stock-based compensation plan been determined based
on
the grant date fair values of awards (the method described in FASB Statement
No.
123, Accounting for Stock-Based Compensation).
Consolidation
of Variable Interest Entities.
In
January 2003, the FASB issued Interpretation No. 46(R) (“FIN 46”), Consolidation
of Variable Interest Entities. FIN 46 addresses consolidation by business
enterprises of variable interest entities (formerly special purpose entities).
In general, a variable interest entity is a corporation, partnership, trust
or
any other legal structure used for business purposes that either (a) does not
have equity investors with voting rights nor (b) has equity investors that
do
not provide sufficient financial resources for the entity to support its
activities. The objective of FIN 46 is not to restrict the use of variable
interest entities, but to improve financial reporting by companies involved
with
variable interest entities. FIN 46 requires a variable interest entity to be
consolidated by a company if that company is subject to a majority of the risk
of loss from the variable interest entity’s activities or entitled to receive a
majority of the entity’s residual returns or both. The consolidation
requirements are effective for the first period that ends after March 15, 2004;
we elected to adopt the requirements effective for the reporting period ending
December 31, 2005. The adoption of FIN 46 had no effect on our consolidated
financial statements.
Change
of Accountants
Effective
April 7, 2006, our Board of Directors, determined to change our independent
accountants and dismissed Jones Simkins, PC as our independent registered public
accounting firm. The Audit Committee of the Board of Directors and the Board
of
Directors approved the decision to change independent auditors. Jones Simkins,
PC had served as our Independent Registered Public Accountant since June 1,
2001
and audited our financial statements for the period June 1, 2001 through
December 31, 2005.
During
our
two most recent fiscal years, ending December 31, 2004 and 2005, (i) there
were
no disagreements between us and Jones Simkins on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure which, if not resolved to the satisfaction of Jones Simkins would
have
caused Jones Simkins to make reference to the matter in its reports on our
financial statements, and (ii) Jones Simkins’ report on our financial statements
did not contain any adverse opinion or disclaimer of opinion, and was not
qualified or modified as to uncertainty, audit scope, or accounting principles
with the exception of the following “going concern” qualification:
“As
of
December 31, 2005, the Company’s revenue generating activities are not in place,
and the Company has incurred losses since inception. These factors raise
substantial doubt about the Company’s ability to continue as a going concern.
Management intends to seek additional funding through business ventures. There
can be no assurance that such funds will be available to the Company or
available on terms acceptable to the Company. The financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.”
On
April
4, 2006, our Audit Committee recommended the engagement of Malone & Bailey,
PC as our independent registered public accounting firm. Our Board of Directors
appointed Malone & Bailey as our Independent Registered Public Accountant
effective April 7, 2006.
19
Industry
US
Gas
Market
Demand
for
natural gas in the United States has grown significantly in recent years. The
Energy Information Administration in its Annual Energy Outlook 2004 estimates
that natural gas demand in the United States could be 31.41 trillion cubic
feet
(“tcf”) by the year 2025. That is an increase of 40 percent over 2004 demand
levels of 22.8 tcf. That is compared to an expected total energy consumption
increase from all sources of 40 percent increasing from 97.7 quadrillion British
thermal units (“BTU”) to 136.5 quadrillion BTUs by 2020. The Energy Information
Administration predicts a 1.6 percent annual increase in total domestic energy
demand over the next 21 years.
In
2006,
total domestic energy demand is projected by Energy Information Administration
to increase at an annual rate of about 1.4 percent, despite continued concerns
about tight supplies and projected high prices for oil and natural gas. Prices
for crude oil, petroleum products, and natural gas are projected to remain
high
through 2006 because of continuing tight international supplies and
hurricane-induced supply losses.
History
of Gas Shale Development
The
first
shale gas production in the United States came from the Appalachian Basin,
where
by 1926 the Devonian shale gas fields were the world’s largest known occurrence
of natural gas. Presently, commercial gas shale production in North America
is
limited to the Barnett Shale in the Ft. Worth Basin, the Caney/Woodford and
Fayetteville shales in the Arkoma Basin in Oklahoma and Arkansas, the Devonian
shales in the Appalachian Basin, the Antrim shale in the Michigan Basin, the
Floyd shale in the Black Warrior Basin, the Lewis shale in the San Juan Basin,
the Bakkan shale in the Williston Basin, and the Mississippian/Devonian shales
in the Delaware Basin. Numerous other basins with prospective shale gas exist,
many of which are currently being explored.
Gas
shales
are currently one of the most active drilling plays in the United States as
a
result of high gas prices, the success of such wells in the Barnett Shale in
the
Fort Worth Basin, technological advancements in drilling and completions, and
predicted near-term shortages of natural gas. Furthermore, gas shale development
may also be supported by the fact current wells are often behind pipe in
developed basins where conventional production is declining, an underutilized
gathering infrastructure exists and markets are accessible.
The
Barnett Shale serves as source, seal, and reservoir to a world-class,
unconventional natural-gas accumulation in the Ft. Worth Basin of north-central
Texas. The formation is a lithologically complex interval of low permeability
that requires artificial stimulation to produce. Shale depths range from
3,500
to 9,000 feet, with 200 to 400 feet of gross pay, 85% of which may be
productive. Initial production was confined to a limited portion of the northern
basin where the Barnett Shale is relatively thick (in excess of 300ft), organic
rich (present-day total organic carbon in excess of 3.0%), thermally mature
(vitrinite reflectance in excess of 1.1%), and enclosed by dense limestone
units
able to contain induced fractures. However, the area of production has expanded
into Tarrant, Johnson, Hill, Sommerville, Hood, and Bosque Counties. Thermal
maturities are key to economic viability with oil-bearing shales in the
northwest of the basin grading to dry gas towards the southeast. As of the
end
of 2005, there have been more than 4,600 wells drilled and completed in the
Barnett Shale that produce more than 1.2 billion cubic feet (“bcf”) of gas per
day. Cumulative gas production from Barnett Shale wells through 2004 was
about
1.2 tcf of gas.
20
Business
Strategy
Our
goal
is to expand and develop our exploration and production business and our
reserves by initially emphasizing the identification and development of oil
and gas opportunities in the Barnett Shale, the Fayetteville Shale and
Kurdistan Iraq. We believe that both the Mississippian developments of the
Barnett Shale in the Ft. Worth Basin and the Fayetteville Shale development
in
the Arkoma Basin provide the greatest near term economic value to us. Calibre's
expansion into Iraqi Kurdistan, a country with the world's fourth largest proven
oil reserves, builds on the Company's drilling and leasing activities focused
in
the Barnett Shale in North Texas initiated in 2005.
Because
the experience of our current management team and project partners, we have
the
potential to execute quickly in identifying opportunities and capturing a land
position. Some exploration and production companies take up to one year to
obtain rights to the land and an additional year to evaluate the land for the
first well. We believe we can shorten the total time for obtaining rights and
evaluation to one year and then commence development in the second
year.
Our
Projects
Currently
our growth depends heavily on the performance of our operating partners, to
execute drilling and completion programs in an environment where shortages
of
equipment and talent are resulting in the escalation of costs. We have no
current capability to act as an operator at this time as additional legal,
land,
drilling, and completion personnel will also be required for us to expand our
operations and to act as an operator. Our senior management team will have
to
hire additional expertise in operations and finance to make a successful
transition into a full operating company. However, in the future we will seek
to
operate wells in which we own an interest as we believe that by controlling
operations, we will be able to more effectively manage the cost and timing
of
exploration and development of our properties, including the drilling and
fracture stimulation methods used.
Projects
with Kerogen Resources
We
are
currently participating in three projects with Kerogen Resources, Inc., a small,
privately held, recently formed exploration and production company, located
in
Houston, Texas. These are as follows:
Reichmann
Petroleum Corporation Project
The
first
project is a joint venture with Kerogen Resources, Crosby Minerals and Reichmann
Petroleum Corporation to explore, acquire and develop properties located in
the
Barnett Shale in the Ft. Worth Basin of North Texas. In October 2005 we
acquired, through Kerogen Resources, a 12.5% working interest in 6,190 net
acres
of leasehold interests in Parker, Tarrant, Denton, and Johnson Counties, Texas.
Subsequent
to the initial acquisition, we purchased a 25% working interest in 443 net
acres
of leasehold interests from Reichmann Petroleum in Johnson County, Texas.
Kerogen Resources provides the technical guidance for the project and in
exchange will receive 12.5% of our working interest in each well drilled. As
of
June
15,
2006, we have paid Kerogen a total $6,708,758, of which
$3,529,098 was for the 12.5% working interest in the initial 6,190
acres,
prepayment of drilling costs on 12
wells and
for the 25% working interest in the leasehold interest in Johnson County and
$1,655,401 was for operating costs (ie, drilling and completion costs) of the
JV
since the original payment. Kerogen
then paid such amounts to Reichmann Petroleum Corporation as reimbursement
of
leasehold costs, drilling and operating expenses.
As of
June 15, 2006, our net acreage position subject to the Reichmann agreement
is
773.94 net acres. As of June 15, 2006, we owed of $1,910,667 as our share of
the
development and operating costs for the wells in this joint
venture.
21
As
of June
15, 2006, Calibre has participated in 22 gross wells. Four wells are currently
producing, nine wells have been drilled, completed and fraced and are waiting
to
be hooked up to a pipeline, four wells have been drilled, completed and are
cleaning up after being frac prior to being hooked up to a gas gathering line,
three wells have been drilled to total depth, completed and are waiting to
be
fraced, and two wells are currently drilling. “Frac” or Fracture stimulation is
a method of stimulating production by opening new flow channels in the rock
surrounding a production well by pumping proppant, a granular substance that
is
carried into the formation by the fracturing fluid and helps keep the cracks
open after a fracture treatment, and fluid into the well at high pressure and
volume.
South
Ft. Worth Basin Project
In
October
2005, we entered into a Participation Agreement for the exploration and
development of wells in a portion of the South Ft. Worth Basin with Kerogen
Resources, Wynn Crosby Energy, Inc. (“Crosby”), and Triangle USA (“Triangle”).
The agreement covers a five county area of approximately 1.5 million acres
and
consists of all lands in these counties outside areas of mutual interest covered
by the Reichmann project. Kerogen Resources is expected to generate shale gas
prospects in the area subject to the agreement. Calibre is obligated to pay
Kerogen Resources $597,600 for its generation of shale gas prospects within
the
five county area. As of June 15, 2006 Calibre has paid $500,000 of this amount
and the balance is due upon the delivery of Kerogen Resources’ technical report.
The
Participation Agreement is for a two year term. Kerogen Resources, as the
technical partner in charge of generating the prospect areas, pays 10% of the
costs in exchange for a 16% working interest. Each of Triangle and us will
pay
30% of costs for a 27% working interest and Crosby, as operator, will pay 30%
of
costs for a 30% working interest. Crosby intends to purchase three drilling
rigs, which are to be dedicated to this project. The agreement would bind all
parties to the same area of mutual interest. Each party is permitted to obtain
oil and gas leases in the territory, but must offer to assign to the other
parties the percentage interest in the leases described above. Prospects are
defined by agreement of the parties. The operator of a lease may require the
other parties to advance payments for their respective percentages of the costs
for leases or drilling of the lease.
Crosby
has
engaged 12 independent land brokers to identify leases for purchase. As of
June
15, 2006, Crosby has leased approximately 11,710.87 net leasehold acres. Our
net
leasehold position pursuant to this agreement is 3,161.93 acres. We have
advanced $1,184,154 to Kerogen for participation in these leases in the Ft,
Worth Basin of Texas. We anticipate Calibre will acquire an additional 5,000
to
7,500 net leasehold acres under the Participation Agreement in the next six
months. Additionally, Kerogen has acquired a 12 square mile 3D seismic program
over part of our joint leasehold position and we have elected to participate
for
our share of the costs of the seismic program. We anticipate that we will
acquire additional 3D seismic over our other leasehold interests in
2006.
Williston
Basin Project
On
September 20, 2005 we entered into a Participation Agreement with Kerogen
Resources covering all of the Williston Basin. Under this agreement, we are
obligated to pay Kerogen Resources the sum of $638,600 for generation of shale
gas prospects in the Williston Basin. As of June 15, 2006 Calibre has paid
$550,000 to Kerogen Resources and the balance is due upon the delivery of
Kerogen Resources’ technical report. As of June 15, 2006 no acreage has been
leased pursuant to this agreement. Kerogen Resources, as the technical partner
in charge of generating the prospect areas, will pay 70% of the costs for a
73%
working interest in the leasehold interests acquired subject to the agreement,
and we pay 30% of the costs for a 27% working interest. Each party will control
their own leases with obligations to offer any leases acquired to the rest
of
the group pro-rata. Prospects are defined based on land and range from 25,000
to
45,000 acres each. The operator on a lease may required participating parties
to
advance funds for leases or drilling.
22
Additional
Acreage
In
addition to the three joint venture projects with Kerogen Resources, as of
June
15, 2006, we have acquired 5,318 gross leasehold acres and 3,417 net acres
in
the Barnett Shale outside of the areas covered by the Reichmann Petroleum JV,
the South Ft. Worth Basin project and the Williston Basin project. We anticipate
that we will commence development activities on these leases in the third
quarter of 2006. Additionally, as of June 15, 2006, we have acquired 2,636
gross
leasehold acres and 1,771 net leasehold acres in the Fayetteville Shale
development in the Arkoma Basin in Arkansas.
“Gross
leasehold acres” means the total number of acres in which we have a working
interest. “Net leasehold acres” means the sum of the fractional working
interests we have in the gross leasehold interests.
Bina
Bawi
Project
On
September 13, 2006, we entered into a Novation and Amendment Agreement
("Novation Agreement") among Hawler Energy, Ltd. ("Hawler Energy"), a Cayman
Islands company, A & T Petroleum Company, Ltd. ("A & T"), a Cayman
Islands company, and Hillwood Energy, Ltd. ("Hillwood"), a Cayman Islands
company. Pursuant to the Novation Agreement we became parties to the
Exploration and Production Sharing Agreement ("the EPSA") dated March 29,
2006
between A&T. Hawler and the Oil and Gas Petroleum Establishment of the
Kurdistan Regional Government (the "OGE"). Our admission as a party to the
EPSA
is subject to the approval of the OGE. We have applied to the OGE for such
approval.
The
Bana-Bawu structure (also known as Bina Bawi) structure is a 30 kilometer
by 10
kilometer surface anticline, which may contain primary oil reserves within
the
Triassic reservoir objective and secondary reserve potential in the Lower
Cretaceous and Jurassic sections of the structure. An initial exploration
well
(Bina Bawi-1) is expected to be drilled to a target depth of 3,050
meters.
Pursuant
to the terms of the EPSA, the OGE grants the other parties the right to explore
and produce oil and natural gas from certain territory that includes the
Bana-Bavu. Upon receipt of the OGE's approval of our becoming a party to
the EPSA, we will have a 10% participating interest in the wells drilled
pursuant to the EPSA. The EPSA requires the parties to conduct certain survey
work, drill one exploratory well and, if the exploratory well is determined
to
be sufficiently profitable, to conduct certain seismic surveys. The total
estimated cost for all parties in the EPSA of the initial survey work and
the
exploratory well is $2.7 million; the estimated cost of the seismic surveys
is
approximately $4.0 million. The EPSA requires the parties thereto to pay
OGE a
bonus of $2.5 million upon a "Commercial Discovery," as defined in the EPSA,
and
to pay other cash bonuses and royalties upon achieving certain production
levels.
We
have entered into a separate letter agreement with Hawler Energy pursuant
to which, in consideration of Hawler Energy's assignment to us of the 10%
working interest through the Novation Agreement, we agreed to pay Hawler
Energy
$2 million on execution of the letter agreement and $1 million upon completion
of the first well under the EPSA, whether it is capable of production or
a dry
hole. In addition we agreed to pay 20% of all billings, including cash calls,
made to Hawler Energy by A&T, as operator, after August 1, 2006 and we
further agreed to pay Hawler Energy the remaining 80% of all such billings
until
the total of such payments equals $2.5 million. Upon OGE approval of the
assignment to us and payment of $2.5 million as provided in the prior sentence,
we will be obligated to pay the future costs properly payable by the holder
of a
10% participating interest in the project.
We
also
have entered into a letter agreement with Hawler Energy pursuant to which
each
party grants the other party the right to participate in the next acquisition
by
the party of any rights or interests for the exploration or production of
oil
and gas in the area of the Kurdistan Regional Government of Iraq; provided
however such area does not include that area pursuant to which Hawler Energy
has
already granted certain rights to other third parties. Pursuant to this letter
agreement we will have the right to obtain a 9% interes in such an acquisition
by Hawler Energy and Hawler Energy will have the right to obtain a 91% interest
in such an interest by us.
Employees
As
of June
15, 2006 we employed five people, none of which are subject to a collective
bargaining agreement. We consider our relations with our employees to be
good.
Properties
Reserves.
As of
June 15, 2006, we have 4 producing wells in which we have an interest and have
recently commenced production. Our net working interest in each of these wells
is 10.9375%.
The
following table presents summary data with respect to our estimated net proved
oil and natural gas reserves as of the dates indicated. Our reserve estimates
as
of December 31, 2005 are based primarily on reserve reports prepared by Ryder
Scott Company, L.P., our independent reserve engineers In preparing its reports,
Ryder Scott Company, L.P. evaluated properties representing approximately 100%
of our PV-10 as of December 31, 2005. All calculations of estimated net proved
reserves have been made in accordance with the rules and regulations of the
Securities and Exchange Commission, or the SEC.
|
Gas
(Mcf)
|
Oil
(MBbls)
|
||||||
|
Total
Proved Reserves:
|
|||||||
|
Balance,
August 17, 2005
|
—
|
—
|
|||||
|
Extensions,
discoveries and improved production
|
69,000
|
||||||
|
Production
|
(3,000
|
)
|
—
|
||||
|
|
|||||||
|
Balance,
December 31, 2005
|
66,000
|
—
|
|||||
23
Well
Status Summary.
The well
status of our drilling operations is as follows:
|
Number
of Gross Wells
|
||
|
Producing
|
4
|
|
|
Fraced
& Waiting on Gas Line Hookup
|
9
|
|
|
Drilled,
Completed, Fraced and Cleaning Up
|
4
|
|
|
Waiting
on Fracture Treatment
|
3
|
|
|
Drilling
|
2
|
|
|
Total
|
22
|
|
In
addition, we have interest in four wells that are currently producing, nine
wells that have been drilled, completed and fraced and are waiting to be hooked
up to a pipeline, four wells that have been drilled, completed and are cleaning
up after being frac prior to being hooked up to a gas gathering line, three
wells that have been drilled to total depth, completed and are waiting to be
fraced, and two wells that are currently drilling. Our gross and net gas well
ownership position is as follows:
|
Gross
Wells
|
Net
Wells
|
||||||
|
Reichmann
Petroleum Corporation Project
|
22
|
2.54
|
|||||
During
the
period ending December 31, 2005, the average sales price per unit of gas
produced was $6.63 and the average lifting costs was $4.30. Our production
has
only recently commenced.
Developed
and Undeveloped Leasehold.
As of
June 15, 2006, We have the following developed and undeveloped leasehold
interests:
Developed
Acreage
|
Gross
Leasehold
|
Net
Leasehold
|
||||||
|
Reichmann
Petroleum Corporation Project
|
303
|
33
|
|||||
|
Total
|
303
|
33
|
|||||
Undeveloped
Acreage
|
Gross
Leasehold
|
Net
Leasehold
|
||||||
|
Reichmann
Petroleum Corporation Project
|
6,330
|
741
|
|||||
|
So.
Ft. Worth Basin Project
|
11,711
|
3,162
|
|||||
|
Other
Ft. Worth Basin
|
5,316
|
3,417
|
|||||
|
Williston
Basin Project
|
0
|
0
|
|||||
|
Arkoma
Basin
|
2,636
|
1,771
|
|||||
|
Total
|
25,993
|
9,088
|
|||||
Our
oil
and gas properties consist primarily of working interests in oil and gas wells
and our ownership of interests in leasehold acreage, both developed and
undeveloped. The table above summarizes our gross and net developed and
undeveloped oil and natural gas acreage under lease or option as of June 1,
2006. A developed acre is considered to be an acre spaced or assignable to
productive wells. A gross acre is an acre in which a working interest is owned.
A net acre is the result that is obtained when our fractional
24
ownership
working interest is multiplied by gross acres. The number of net acres is the
sum of the factional working interests owned in gross acres expressed as whole
numbers and fractions thereof. Undeveloped acreage is considered to be those
lease acres on which wells have not been drilled or completed to a point that
would permit the production of commercial quantities of oil or natural gas,
regardless of whether that acreage contains proved reserves, but does not
include undrilled acreage held by production under the terms of a lease. As
is
customary in the oil and gas industry, we can generally retain our interest
in
undeveloped acreage by drilling activity that establishes commercial production
sufficient to maintain the leases or by paying delay rentals during the
remaining primary term of leases. The oil and natural gas leases in which we
have an interest are for varying primary terms, and if production under a lease
continues from our developed lease acreage beyond the primary term, we are
entitled to hold the lease for as long as oil or natural gas is
produced.
Office
Lease.
Calibre
Energy, Inc. also leases 2,360 square feet of office space in Washington, D.C.
that serves as its corporate office. The lease is at market rates and expires
in
October 2008. Additionally, Calibre has an operations office of 4,000 square
feet in Houston, Texas.. The lease is at market rates and expires in August
30,
2011.
Government
Regulation
Regulation
of transportation of oil
Sales
of
crude oil, condensate and natural gas liquids are not currently regulated and
are made at negotiated prices. Nevertheless, Congress could reenact price
controls in the future.
Our
sales
of crude oil are affected by the availability, terms and cost of transportation.
The transportation of oil in common carrier pipelines is also subject to rate
regulation. The Federal Energy Regulatory Commission, or the FERC, regulates
interstate oil pipeline transportation rates under the Interstate Commerce
Act.
In general, interstate oil pipeline rates must be cost-based, although
settlement rates agreed to by all shippers are permitted and market-based rates
may be permitted in certain circumstances. Effective January 1, 1995, the FERC
implemented regulations establishing an indexing system (based on inflation)
for
transportation rates for oil that allowed for an increase or decrease in the
cost of transporting oil to the purchaser. A review of these regulations by
the
FERC in 2000 was successfully challenged on appeal by an association of oil
pipelines. On remand, the FERC in February 2003 increased the index slightly,
effective July 2001. Intrastate oil pipeline transportation rates are subject
to
regulation by state regulatory commissions. The basis for intrastate oil
pipeline regulation, and the degree of regulatory oversight and scrutiny given
to intrastate oil pipeline rates, varies from state to state. Insofar as
effective interstate and intrastate rates are equally applicable to all
comparable shippers, we believe that the regulation of oil transportation rates
will not affect our operations in any way that is of material difference from
those of our competitors.
Further,
interstate and intrastate common carrier oil pipelines must provide service
on a
non-discriminatory basis. Under this open access standard, common carriers
must
offer service to all similarly situated shippers requesting service on the
same
terms and under the same rates. When oil pipelines operate at full capacity,
access is governed by prorationing provisions set forth in the pipelines’
published tariffs. Accordingly, we believe that access to oil pipeline
transportation services generally will be available to us to the same extent
as
to our competitors.
Regulation
of transportation and sale of natural gas
25
Historically,
the transportation and sale for resale of natural gas in interstate commerce
have been regulated pursuant to the Natural Gas Act of 1938, the Natural Gas
Policy Act of 1978 and regulations issued under those Acts by the FERC. In
the
past, the federal government has regulated the prices at which natural gas
could
be sold. While sales by producers of natural gas can currently be made at
uncontrolled market prices, Congress could reenact price controls in the future.
Deregulation of wellhead natural gas sales began with the enactment of the
Natural Gas Policy Act. In 1989, Congress enacted the Natural Gas Wellhead
Decontrol Act. The Decontrol Act removed all Natural Gas Act and Natural Gas
Policy Act price and non-price controls affecting wellhead sales of natural
gas
effective January 1, 1993.
FERC
regulates interstate natural gas transportation rates and service conditions,
which affects the marketing of natural gas that we produce, as well as the
revenues we receive for sales of our natural gas. Since 1985, the FERC has
endeavored to make natural gas transportation more accessible to natural gas
buyers and sellers on an open and non-discriminatory basis. The FERC has stated
that open access policies are necessary to improve the competitive structure
of
the interstate natural gas pipeline industry and to create a regulatory
framework that will put natural gas sellers into more direct contractual
relations with natural gas buyers by, among other things, unbundling the sale
of
natural gas from the sale of transportation and storage services. Beginning
in
1992, the FERC issued Order No. 636 and a series of related orders to implement
its open access policies. As a result of the Order No. 636 program, the
marketing and pricing of natural gas have been significantly altered. The
interstate pipelines’ traditional role as wholesalers of natural gas has been
eliminated and replaced by a structure under which pipelines provide
transportation and storage service on an open access basis to others who buy
and
sell natural gas. Although the FERC’ s orders do not directly regulate natural
gas producers, they are intended to foster increased competition within all
phases of the natural gas industry.
In
2000,
the FERC issued Order No. 637 and subsequent orders, which imposed a number
of
additional reforms designed to enhance competition in natural gas markets.
Among
other things, Order No. 637 effected changes in FERC regulations relating to
scheduling procedures, capacity segmentation, penalties, rights of first refusal
and information reporting. Most pipelines’ tariff filings to implement the
requirements of Order No. 637 have been accepted by the FERC and placed into
effect.
Gathering
service, which occurs upstream of jurisdictional transmission services, is
regulated by the states on shore and in state waters. Although its policy is
still in flux, FERC has reclassified certain jurisdictional transmission
facilities as non-jurisdictional gathering facilities, which may increase our
costs of getting gas to point of sale locations.
Intrastate
natural gas transportation is also subject to regulation by state regulatory
agencies. The basis for intrastate regulation of natural gas transportation
and
the degree of regulatory oversight and scrutiny given to intrastate natural
gas
pipeline rates and services varies from state to state. Insofar as such
regulation within a particular state will generally affect all intrastate
natural gas shippers within the state on a comparable basis, we believe that
the
regulation of similarly situated intrastate natural gas transportation in any
states in which we operate and ship natural gas on an intrastate basis will
not
affect our operations in any way that is of material difference from those
of
our competitors. Like the regulation of interstate transportation rates, the
regulation of intrastate transportation rates affects the marketing of natural
gas that we produce, as well as the revenues we receive for sales of our natural
gas.
Regulation
of production
The
production of oil and natural gas is subject to regulation under a wide range
of
local, state and federal statutes, rules, orders and regulations. Federal,
state
and local statutes and regulations require permits for drilling operations,
drilling bonds and reports concerning operations. Such regulations govern
conservation matters, including provisions for the unitization or pooling of
oil
and natural gas properties, the establishment of maximum allowable rates of
production from oil and natural gas wells, the regulation of well spacing,
and
plugging and abandonment of wells. The effect of these regulations is to limit
the amount of oil and natural gas that we can produce from our wells and to
limit the number of wells or the locations at which we can drill, although
we
can apply for exceptions to such regulations or to have reductions in well
spacing. Moreover, each state generally imposes a production or severance tax
with respect to the production and sale of oil, natural gas and natural gas
liquids within its jurisdiction.
26
The
failure to comply with these rules and regulations can result in substantial
penalties. Our competitors in the oil and natural gas industry are subject
to
the same regulatory requirements and restrictions that affect our operations.
Environmental,
health and safety regulation
General.
Our
operations are subject to stringent and complex federal, state, local and
provincial laws and regulations governing environmental protection, health
and
safety, including the discharge of materials into the environment. These laws
and regulations may, among other things:
| · |
require
the acquisition of various permits before drilling
commences;
|
| · |
restrict
the types, quantities and concentration of various substances that
can be
released into the environment in connection with oil and natural
gas
drilling, production and transportation
activities;
|
| · |
limit
or prohibit drilling activities on certain lands lying within wilderness,
wetlands and other protected areas;
and
|
| · |
require
remedial measures to mitigate pollution from former and ongoing
operations, such as requirements to close pits and plug abandoned
wells.
|
These
laws
and regulations may also restrict the rate of oil and natural gas production
below the rate that would otherwise be possible. The regulatory burden on the
oil and gas industry increases the cost of doing business in the industry and
consequently affects profitability. Additionally, Congress and federal and
state
agencies frequently revise environmental, health and safety laws and
regulations, and any changes that result in more stringent and costly waste
handling, disposal and cleanup requirements for the oil and gas industry could
have a significant impact on our operating costs.
The
following is a summary of the
existing material
environmental, health and safety laws and regulations to which our business
operations are subject.
Waste
handling.
The
Resource Conservation and Recovery Act, or RCRA, and comparable state statutes,
regulate the generation, transportation, treatment, storage, disposal and
cleanup of hazardous and non-hazardous wastes. Under the auspices of the federal
Environmental Protection Agency, or EPA, the individual states administer some
or all of the provisions of RCRA, sometimes in conjunction with their own,
more
stringent requirements. Drilling fluids, produced waters and most of the other
wastes associated with the exploration, development and production of crude
oil
or natural gas are currently regulated under RCRA’s non-hazardous waste
provisions. However, it is possible that certain oil and natural gas exploration
and production wastes now classified as non-hazardous could be classified as
hazardous wastes in the future. Any such change could result in an increase
in
our costs to manage and dispose of wastes, which could have a material adverse
effect on our results of operations and financial position.
27
Comprehensive
Environmental Response, Compensation and Liability Act.
The
Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA,
also known as the Superfund law, imposes joint and several liability, without
regard to fault or legality of conduct, in connection with the release of a
hazardous substance into the environment. Persons potentially liable under
CERCLA include the current or former owner or operator of the site where the
release occurred and anyone who disposed or arranged for the disposal of a
hazardous substance to the site where the release occurred. Under CERCLA, such
persons may be subject to joint and several liability for the costs of cleaning
up the hazardous substances that have been released into the environment,
damages to natural resources and the costs of certain health studies. In
addition, it is not uncommon for neighboring landowners and other third parties
to file claims for personal injury and property damage allegedly caused by
the
hazardous substances released into the environment.
We
own and
lease, and may in the future operate, numerous properties that have been used
for oil and natural gas exploitation and production for many years. Hazardous
substances may have been released on, at or under the properties owned, leased
or operated by us, or on, at or under other locations, including off-site
locations, where such substances have been taken for disposal. In addition,
some
of our properties have been or are operated by third parties or by previous
owners or operators whose handling, treatment and disposal of hazardous
substances were not under our control. These properties and the substances
disposed or released on, at or under them may be subject to CERCLA, RCRA and
analogous state laws. In certain circumstances, we could be responsible for
the
removal of previously disposed substances and wastes, remediate contaminated
property or perform remedial plugging or pit closure operations to prevent
future contamination. In addition, federal and state trustees can also seek
substantial compensation for damages to natural resources resulting from spills
or releases.
Water
discharges.
The
Federal Water Pollution Control Act, or the Clean Water Act, and analogous
state
laws, impose restrictions and strict controls with respect to the discharge
of
pollutants, including oil and other substances generated by our operations,
into
waters of the United States or state waters. Under these laws, the discharge
of
pollutants into regulated waters is prohibited except in accordance with the
terms of a permit issued by EPA or an analogous state agency. Federal and state
regulatory agencies can impose administrative, civil and criminal penalties
for
non-compliance with discharge permits or other requirements of the Clean Water
Act and analogous state laws and regulations.
The
Safe
Drinking Water Act, or SDWA, and analogous state laws impose requirements
relating to underground injection activities. Under these laws, the EPA and
state environmental agencies have adopted regulations relating to permitting,
testing, monitoring, record keeping and reporting of injection well activities,
as well as prohibitions against the migration of injected fluids into
underground sources of drinking water.
Air
emissions.
The
Federal Clean Air Act and comparable state laws regulate emissions of various
air pollutants through air emissions permitting programs and the imposition
of
other requirements. In addition, EPA and certain states have developed and
continue to develop stringent regulations governing emissions of toxic air
pollutants at specified sources. Federal and state regulatory agencies can
impose administrative, civil and criminal penalties for non-compliance with
air
permits or other requirements of the Federal Clean Air Act and analogous state
laws and regulations.
The
Kyoto
Protocol to the United Nations Framework Convention on Climate Change became
effective in February 2005. Under the Protocol, participating nations are
required to implement programs to reduce emissions of certain gases, generally
referred to as greenhouse gases, that are suspected of contributing to global
warming. The United States is not currently a participant in the Protocol,
and
Congress has not acted upon recent proposed legislation directed at reducing
greenhouse gas emissions. However, there has been support in various regions
of
the country for legislation that requires reductions in greenhouse gas
emissions, and some states have already adopted legislation addressing
greenhouse gas emissions from various sources, primarily power plants. The
oil
and natural gas industry is a direct source of certain greenhouse gas emissions,
namely carbon dioxide and methane, and future restrictions on such emissions
could impact our future operations.
28
National
Environmental Policy Act.
Oil and
natural gas exploration and production activities on federal lands are subject
to the National Environmental Policy Act, or NEPA. NEPA requires federal
agencies, including the Department of Interior, to evaluate major agency actions
that have the potential to significantly impact the environment. In the course
of such evaluations, an agency will prepare an Environmental Assessment that
assesses the potential direct, indirect and cumulative impacts of a proposed
project and, if necessary, will prepare a more detailed Environmental Impact
Statement that may be made available for public review and comment. All
exploration and production activities on federal lands require governmental
permits that are subject to the requirements of NEPA. This process has the
potential to delay the development of oil and natural gas projects on federal
lands.
Health,
safety and disclosure regulation.
We are
subject to the requirements of the federal Occupational Safety and Health Act
(OSHA) and comparable state statutes. The OSHA hazard communication standard,
the Emergency Planning and Community Right to Know Act and similar state
statutes require that we organize and/or disclose information about hazardous
materials stored, used or produced in our operations.
We
expect
to incur capital and other expenditures related to environmental compliance.
Although we believe that our compliance with existing requirements will not
have
a material adverse impact on our financial condition and results of operations,
we cannot assure you that the passage of more stringent laws or regulations
in
the future will not have an negative impact on our financial position or results
of operation.
Legal
Proceedings.
We
are not
currently a party to any legal proceedings.
29
The
following table sets forth certain information regarding our current directors
and executive officers.
Our
executive officers are elected by the board of directors and serve at the
discretion of the board. All of the current directors serve until the next
annual stockholders’ meeting or until their successors have been duly elected
and qualified.
|
Name
|
Age
|
Position
|
|||
|
Prentis
B. Tomlinson, Jr.
|
63
|
President,
CEO and Chairman of the Board
|
|||
|
Edward
L. Moses, Jr.
|
67
|
Vice
Chairman, Director
|
|||
|
O.
Oliver Pennington
|
35
|
Vice
President and Chief Financial Officer
|
|||
|
William B.
Nunnallee
|
59
|
Vice
President of Land
|
|||
|
W.
Richard Anderson
|
50
|
Director
|
|||
| Derek H.L. Buntain |
64
|
Director | |||
|
Kirwin
L. Drouet
|
57
|
Director | |||
The
following biographies describe the business experience of our executive
officers
and directors. Each of our officers and directors, other than Messrs.
Drouet,
Buntain and Nunnallee, was appointed to their positions on January 27,
2006 in
connection with the merger of our subsidiary, Calibre Acquisition Co.,
with the
predecessor of our business.
Prentis
B.
Tomlinson, Jr.,
President, Chairman and CEO. Mr. Tomlinson has over 30 years of experience
in
the energy industry, and is a second-generation oil and gas man who traces
his
roots back to Tomlinson Geophysical Service, founded in 1937 by P. B. Tomlinson,
Sr. Mr. Tomlinson has founded a number of companies in the energy sector,
including exploration and production companies, a crude trading company and
an
oilfield service company, TGS Geophysical, Inc., which merged with Nopec
in 1997
to form TGS Nopec (OSE: TGS). Since 2001 Mr. Tomlinson has been a private
investor. In 2004 Mr. Tomlinson helped to found, and remains a significant
shareholder in, a drilling technology company based in Houston, Texas, Particle
Drilling Technologies, Inc. (www.particledrilling.com) (Nasdaq: PDRT). Since
February 2006, Mr. Tomlinson has also served as Chairman and CEO of Standard
Drilling, Inc, a privately held land drilling company based in Houston, Texas.
See “Certain Relationships and Related Party Transactions.”
Edward
L. Moses, Jr.,
Vice
Chairman and Director. Mr. Moses has over 40 years experience in the oil
and gas
industry beginning as a roustabout and roughneck for drilling contractors
while
studying for his B.S. in Petroleum Engineering at Texas A&M University.
After receiving his engineering degree in 1958, Mr. Moses joined The Superior
Oil Company where he was Manager of Domestic and International Drilling
Operations. He left Superior Oil in 1976 to work as an independent consultant
where he and his partners provided consulting and turnkey drilling services
throughout the Gulf Coast, South Texas, and North Sea areas as well as India
and
Central America. Mr. Moses joined Deep Tech companies in 1989 as Vice President,
Engineering. Before leaving Deep Tech in 1998, he served as Senior Vice
President of North Atlantic Pipeline Partners, L.P.; Senior Vice President
of
Tatham Offshore Canada, Limited; Managing Director of Deepwater Production
Systems, Inc.; and Executive Vice President of RIGCO North American, L.L.C.
From
1998 until 2000, Mr. Moses was the Chairman and Chief Executive Officer of
Prime
Natural Resources, Inc. a Houston based exploration and production company.
From
1998 until 2005 he was a Director of Horizon Offshore (Nasdaq: HOFF). Since
2000
Mr. Moses has been a private investor. He is a Professional Engineer in Texas
and Louisiana, member of Society of Petroleum Engineers, Texas Society of
Professional Engineers, and a Director of Spindletop (Association). Since
February 2006, Mr. Moses has also served as Vice Chairman of Standard Drilling.
30
O.
Oliver Pennington, III, Vice President and Chief
Financial Officer. Mr. Pennington has over 11 years of experience in the
financial industry and can trace his roots in the oil and gas business through
his grandfather, Arthur Buzzini, back to the mid-1930s. From July 2005 until
December of 2005 Mr. Pennington was a private investor. From January 2003
until
June 2005, Mr. Pennington was employed as a partner and senior member of
the
investment team of Sthenos Capital Limited, a hedge fund based in London.
From
September 2002 until January 2005, Mr. Pennington was a private investor.
From
August 1996 until September of 2002 as the Head of International Trading,
analyst and member of the international investment team at Kingdon Capital
Management Corp., a hedge fund based in New York. Mr. Pennington started
his
career as a trader for AIM Management, an asset management company based
in
Houston. Since February 2006, Mr. Pennington has also served as CFO of Standard
Drilling. See "Certain Relationships and Related Party
Transactions."
William
B.
Nunnallee, has served as Vice President of Land, since June 2006.
Mr. Nunnallee has been providing services to the exploration
industry as
an Independent Petroleum Landman for over 30 years. In 1976, he entered
the
petroleum industry under the tutelage of his father, Bert M. Nunnallee,
now
deceased, a then practicing oil and gas attorney. Mr. Nunnallee earned
a B.B.A.,
conferred with business honors and majoring in Petroleum Land Management,
from
the University of Houston - Downtown. He is a member of The Honor Society
of
Phi Kappa Phi and Beta Gamma Sigma, Honor Society for
Collegiate Schools of Business. Since 1989, Mr. Nunnallee has provided
petroleum
land & administration services over oil and gas properties owned by trusts
created under the wills of Judge J. A. Elkins, and wife, Isabel M. Elkins,
comprised of producing and nonproducing royalty, overriding royalty,
mineral and
working interests situated in 50 counties in the State of Texas, as well
as the
states of Louisiana, Oklahoma, Mississippi, Arkansas, Florida and
Michigan.
W.
Richard Anderson,
Director. Since 2002, Mr. Anderson has served as President and Chief Executive
Officer of Prime Natural Resources, Inc. and was formerly its Chief Financial
Officer (1998-2002). Prime Natural Resources www.primenri.com is a closely
held
exploration and production company. Prior to his employment at Prime, he was
employed by Hein & Associates, LLP, a certified public accounting firm,
where he served as a partner from 1989 to January 1995 and as a managing partner
from January 1995 until October 1998. Since 1999, Mr. Anderson has served as
a
Director of Boots & Coots International Well Control www.bootsandcoots.com
(AMEX: WEL), Chairman the Audit Committee, and member of the Compensation
Committee. Mr. Anderson also formerly served as a Director and Chairman of
the
Audit Committees of Grant Geophysical, Inc www.grantgeo.com., and its subsidiary
Solid State Geophysical, Inc.(TSE), Professional Geophysics, Inc., and Seis
Pros, Inc. www.seispros.com.
Derek
L. Buntain, has served as Director, since October 2006. Mr.
Buntain currently serves as the President of the Dundee Bank, a deposit
taking
institution which manages funds and trusts, provides mutual fund administration
services to the offshore mutual and hedge fund industries, and operates
a
merchant banking portfolio. Mr. Buntain also serves as the President of
Goodman
& Company Limited (Bermuda) which structures tax efficient vehicles for
international clients, manages their investments and provides investment
management to mutual funds. Over his 40 year career, Mr. Buntain has served
as
the Vice Chairman of Targa International Limited (1993-1996), a venture
capital
firm. Chairman of Pythonic Trading Company Limited (1989-1993), which traded
physical food commodities world-wide. President of Canadian Express Limited
(1987-1989). Director of Institutional Sales and Trading for Merrill Lynch
Canada Inc. (1974-1984) and Director of Corporate Finance for Merrill Lynch
Canada Inc. (1984-1987). Mr Buntain began his career in 1964 at Burns Bros.
and
Denton Lt. as a research analyst, rose to Director of Research from 1970-1972
and served as Director of Equity Trading from 1972-1974. In addition, Mr.
Buntain holds a number of directorships in both public and private companies
and
has served on audit, pension, human resource, corporate governance, compensation
and stock buy-back committees of those companies.
Kirwin
L.
Drouet, has served as Director since October 2006 . Kirwin L.
Drouet has 34 years of experience in accounting, finance and entrepreneurial
activities. Mr. Drouet began his career in 1972 at Arthur Andersen & Co. and
left as an Experienced Audit Manager in 1981. Since 1999, he has served
as
consultant to ARTA Equity Advisors LLC, a private investment company based
in
Houston, Texas and President of Rice Exploration Company, a privately-held
company he founded in 1984. Mr. Drouet also served as the Chief Financial
Officer of nXp Technologies (2001-2006), a privately-held provider of content
filtering and internet access control software. In addition, Mr. Drouet
has
served as Chief Financial Officer of Molecular Electronics Corp. (2001),
a
privately-held nanotechnology company; and Chief Operating Officer of iExalt,
Inc. (1999-2000), a public internet services company. Prior to Mr. Drouet’s
affiliation with ARTA Equity Advisors LLC, he served as Executive Vice
President, Chief Financial Officer and Chief Operating Officer of Stellar
Event
& Presentation Resources, Inc. / The Abbey Group, Inc. (1995-1999); Vice
President of Control and Administration and Chief Financial Officer of
MAXXAM
Property Co. (1993-1995), a wholly owned subsidiary of MAXXAM, Inc.; Vice
President of Finance and Chief Financial Officer of Sam Houston Race Park,
Inc.
(1990-1994); and Vice President of Finance and member of the Board of Directors
of Odyssey Energy, Inc. (1981-1984), a privately-held exploration company.
Mr.
Drouet is the Initial Founder of Rice Exploration Co. and Sam Houston Race
Park,
Inc. In addition, Mr. Drouet is a Certified Public Accountant in the State
of
Texas and a member of a number of professional organizations. He most recently
served as a member of the Board of Directors and Secretary/Treasurer of
the
Jones Graduate School Partners at Rice University
(2004-2006).
Committees
of the Board of Directors
We
currently have an audit committee, a compensation committee, a nominating
and corporate governance committee and a conflicts committee.
Audit
Committee.
The
audit committee selects, on behalf of our board of directors, an independent
public accounting firm to be engaged to audit our financial statements, discuss
with the independent auditors their independence, review and discuss the audited
financial statements with the independent auditors and management and recommend
to our board of directors whether the audited financials should be included
in
our Annual Reports to be filed with the Securities and Exchange Commission.
The
audit committee operates pursuant to a written charter, which was adopted
February 3, 2005. The current members of the audit committee are Mr.
Anderson, as Chairman, and Messrs. Buntain and Drouet.
31
All
of the
current members of the audit committee are non-employee directors who: (1)
meet
the criteria for independence set forth in Rule 10A-3(b)(1) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”); (2) have not participated
in the preparation of our financial statements or the financial statements
of
Hardwood Doors and Milling Specialties, Inc.; and (3) are able to read and
understand fundamental financial statements, including a balance sheet, income
statement and cash flow statement. The board has determined that Mr. Anderson
qualifies as an “Audit Committee Financial Expert” as defined by item 401(e) of
Regulation S-B of the Exchange Act.
Compensation
Committee. The compensation committee reviews and either approves, on
behalf of our board of directors, or recommends to the board of directors
for
approval (1) the annual salaries and other compensation of our executive
officers and (2) individual stock and stock option grants. The compensation
committee also provides assistance and recommendations with respect to
our
compensation policies and practices and assists with the administration
of our
compensation plans. The members of our compensation committee have been
found by
the Board of Directors to be “independent directors” using the criteria for
independence set forth in Rule 10A-3(b)(1) under the Exchange Act, and
are
neither an officer nor employee of us or our subsidiary. The compensation
committee operates pursuant to a written charter,which was adopted August
11,
2004. The current members of the compensation committee are Mr. Drouet,
as
Chairman, Mr. Buntain and Mr. Anderson.
Nominating
and Corporate Governance Committee. The nominating and corporate governance
committee assists our board of directors in fulfilling its responsibilities
by:
identifying and approving individuals qualified to serve as members of
our board
of directors, selecting director nominees for our annual meetings of
shareholders, evaluating the performance of our board of directors, and
developing and recommending to our board of directors corporate governance
guidelines and oversight with respect to corporate governance and ethical
conduct. Mr. Anderson, as Chairman, and Messrs. Buntain and Drouet are
the
current members of the nominating and corporate governance committee; they
have
been found by the Board of Directors to be “independent directors” using the
criteria for independence set forth in Rule 10A-3(b)(1) under the Exchange
Act.
This committee operates pursuant to a written charter adopted on April
4,
2006.
Conflicts
Committee. The conflicts committee determines all actions that are required
to
be taken or may be taken, by us with respect to any opportunity or transaction
that involves a conflict of interest for any officer or director. The
members of
the conflicts committee are also charged with overseeing the amount of
time
devoted to the management of our business by officers and directors who
are also
employed by Standard Drilling, Inc. Our Board of Directors has granted
the
conflicts committee full and final authority to make decisions for the
Board
with respect to these matters and the Board of Directors may not adopt
any
position or take any action that is contrary to a determination of the
conflicts
committee. The authority granted to the conflicts committee includes
the power
to terminate, with or without cause, those officers who are also officers
or
directors of Standard Drilling, Inc.
Each
officer or director who is notified of, offered or made aware of an opportunity
or transaction that involves a conflict of interest for any of our officers
or
directors is required to report it to the Board and to the conflicts
committee.
In order to be able to make the evaluations necessary for its decisions,
the
conflicts committee has the right to require reports from any of our
officers
and employees and to engage its own geologists, geophysicists, attorneys,
accountants and other experts and advisors as it deems necessary to assist
it in
making its determinations. The conflicts committee will hold meetings
as
determined by either its Chairman or a majority of its members; the conflicts
committee may also act by unanimous written consent of its members. The
vote of
a majority of its members will constitute the decision of the committee.
The
conflicts committee is comprised of Mr. Drouet. This committee operates
pursuant
to a written charter adopted on January 9, 2007.
Compensation
Committee Interlocks And Insider Participation. During the year ended
December 31, 2005, we did not have a compensation committee because Luke
Frazier served as our sole officer and director. Following our acquisition
of
Calibre Energy, Inc. in January 2006 and the appointment of our current Board
of
Directors, our Board of Directors formed a compensation committee comprised
of
Mr. Anderson. Since then Mr. Drouet and Mr. Buntain have also been appointed
to
the compensation committee. None of the committee members have ever been
an
employee of Calibre Energy, Inc. None of our executive officers serve as
a
member of the board of directors or compensation committee of any entity
that
has any executive officer serving as a member of our Board of Directors or
compensation committee.
Compensation
of Directors
On
April
4, 2006, the compensation committee (the “Committee”) of our Board of Directors
recommended that the Board approve new compensation for Board members to be
effective as of January 1, 2006. The new compensation was approved by the Board
on April 25, 2006. Under new compensation program,, non-employee directors
will
receive an annual retainer of $20,000 and $1,500 for each formal Board meeting
attended. In addition, each non-employee director who is also a committee member
will receive an annual committee retainer fee of $2,500 and $750 for each formal
committee meeting attended. Each non-employee director who is also a committee
chair will receive an additional annual retainer of $2,500. In addition, each
non-employee director will be granted 20,000
32
shares
of
restricted common stock and an option for 25,000 shares of common stock. In
addition, any new non-employee directors will be granted 20,000 shares of
restricted common stock an option to purchase 25,000 shares of the common stock
at the market price at the time of grant as a one time award upon joining the
Board. All option awards will be non-qualified stock options and, together
with
all awards of restricted stock, will be issued pursuant to equity compensation
plans in effect at the time of the award and will be exercisable for a ten-year
period from the date of grant of the award. The restricted stock and option
awards will vest in 50% installments on each December 31.
The
following tables set forth certain information regarding our CEO and each of
our
most highly-compensated officers whose total annual salary and bonus for the
period ending December 31, 2005 exceeded $100,000.
Summary
Compensation Table
|
Annual
Compensation
|
Long
Term Compensation Awards
|
|||||||||||||||
|
Name
and
Principal
Position (1)
|
Year
|
Salary
($)
|
|
Bonus
($)
|
|
Securities
Underlying
Options
(#)
|
|
All
Other
Compensation
($)
|
|
|||||||
|
Prentis
B. Tomlinson(2)
|
2005
|
$
|
15,000
|
-
|
4,000,000
|
-
|
||||||||||
|
President
and Chief Executive Officer
|
2004
|
-
|
-
|
-
|
||||||||||||
|
2003
|
-
|
-
|
-
|
|||||||||||||
|
O.
Oliver Pennington, III (2)
|
2005
|
-
|
-
|
1,000,000
|
-
|
|||||||||||
|
Chief
Financial Officer
|
2004
|
-
|
-
|
-
|
||||||||||||
|
2003
|
-
|
-
|
-
|
|||||||||||||
|
William
B. Nunnallee (3)
|
2005
|
$
|
-
|
-
|
-
|
-
|
||||||||||
|
Vice
President of Land
|
2004
|
-
|
-
|
-
|
||||||||||||
|
2003
|
-
|
-
|
-
|
-
|
||||||||||||
33
(1) Luke
Frazier was the sole officer for Hardwood Doors and Milling Speciality during
2003, 2004, and 2005, and received no compensation during those years. Mr.
Frazier resigned as an officer and director on January, 27, 2006.
(2) Each
executive served for less than a full year in 2005. See “Executive Employment
Contracts” for a discussion of Annual Salary and options.
(3) Mr.
Nunnallee became an executive officer in 2006. See “Executive Employment
Contracts” for a discussion of Annual Salary and options.
Option
Grants in Fiscal Year Ending December 31, 2005
(Individual
Grants)
|
Name
|
Number
of Securities Options Granted
|
%
of Total Options Granted to Fiscal Year
|
Exercise/Base
Price ($/Share)
|
Expiration
Date
|
|
Prentis
B. Tomlinson
|
4,000,000
|
62%
|
$0.05
|
August
2015
|
|
O.
Oliver Pennington
|
1,000,000
|
16%
|
$0.24
|
December
2015
|
|
William
B. Nunnallee
|
-
|
-
|
-
|
-
|
Options
Exercises and First Quarter 2006 Quarter End Values
|
Number
of Shares
|
Value
of Unexercised
|
|||||||||||||||
|
Underlying
Unexercised
|
In-the-Money
Options
|
|||||||||||||||
|
Options
at March 31 2006
|
at
March 31 2006 (1)
|
|||||||||||||||
|
Name
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
||||||||||||
|
Prentis
B. Tomlinson (1)
|
4,000,000
|
0
|
$10,800,000
|
$0
|
|
|||||||||||
|
O.
Oliver Pennington, III (2)
|
500,000
|
500,000
|
$1,255,000
|
$1,255,000
|
||||||||||||
|
William
B. Nunnallee (3)
|
-
|
-
|
-
|
-
|
||||||||||||
| (1) |
The
value of “in-the-money” stock options represents the difference between
the $0.05 exercise price of such options and the fair market value
of
$2.75 per share of common stock as of March 31, 2006, the closing
price of
the common stock reported on the OTC Bulletin
Board.
|
| (2) |
The
value of “in-the-money” stock options represents the difference between
the $0.24 exercise price of such options and the fair market value
of
$2.75 per share of common stock as of March 31, 2006, the closing
price of
the common stock reported on the OTC Bulletin
Board.
|
| (3) | Mr. Nunnallee became an executive officer in 2006. |
No
options
were exercised during the fiscal year ended December 31, 2005. No stock
appreciation rights were outstanding at the end of the 2005 fiscal
year.
Executive
Employment Contracts
During
the
fiscal years ended December 31, 2003, 2004, 2005 and through January 27, 2006,
neither Luke Frazier, our sole director and officer during such years and period
, received any compensation from us. Set forth below is a summary of the
material terms of the compensation and employment agreements made between us
and
our executive officers.
34
Prentis
B. Tomlinson, Jr.
Mr.
Tomlinson entered into an employment agreement effective October 1, 2005. The
agreement has a three year term and provides that Mr. Tomlinson will serve
as
President and CEO. Mr. Tomlinson receives an annual base salary of $180,000,
which may be further increased at our discretion. Not withstanding the above,
the base salary of Mr. Tomlinson shall be increased to $360,000 on the third
anniversary date from the effective date of the agreement. Mr. Tomlinson has
also received the following stock options pursuant to the agreement:
non-statutory options to purchase 4,000,000 shares of our common stock at a
price of $.05 per share, which options are fully vested and shall survive Mr.
Tomlinson termination date. Mr. Tomlinson is entitled to participate in any
employee benefit plans that are made available to our employees.
Edward
L. Moses, Jr.
Mr.
Moses entered into an employment agreement effective October 1, 2005. The
agreement has a three year term and provides that Mr. Moses will serve as Vice
Chairman. Mr. Moses receives an annual base salary of $120,000, which may be
increased at our discretion. Mr. Moses has also received the following stock
options pursuant to the agreement: non-statutory options to purchase 750,000
shares of our common stock at a price of $0.05 per share, which options are
fully vested. Mr. Moses is entitled to participate in our employee benefit
plans
are made available to our employees.
O.
Oliver Pennington, III.
Mr.
Pennington entered into an employment agreement effective December 28, 2005.
The
agreement has a three year term and provides that Mr. Pennington will serve
as
Vice President and Chief Financial Officer. Mr. Pennington receives an annual
base salary of $200,000, which may be increased at our discretion. Mr.
Pennington has also received the following stock options pursuant to the
agreement: non-statutory options to purchase 500,000 shares of our common stock
at a price of $.24 per share, which options are fully vested and has received
incentive stock options to purchase 500,000 shares of our common stock at a
price of $.24 pursuant to our qualified stock option plan that shall vest over
a
four year period. Mr. Pennington is entitled to participate in our employee
benefit plans are made available to our employees.
William
B. Nunnallee.
Mr. Nunnallee entered into an employment agreement effective June 13, 2006.
The agreement has a three-year term and provides that Mr. Nunnallee will serve
as Vice President of Land. Mr. Nunnallee receives an annual base salary of
$150,000, which may be increased at our discretion and an automoblile allowance
of $1,000 per month. Mr. Nunnallee also received the following stock option
pursuant to the agreement: non-qualified options to purchase 300,000 shares
of
our common stock at a price of $2.40 per share. Such options are fully vested,
and Mr. Nunnallee is entitled to participate in other employee benefit
plans that we may adopt.
Other
Employment Agreement Terms.
Each of
the foregoing employment agreements also include the following terms:
During
the
term of the agreement, we may terminate the employee’s employment at any time by
giving three months written notice. Additionally, we may terminate the
employee’s employment for cause upon written notice by the company. The employee
may terminate his employment for “Good Reason” when there is a decrease in his
base salary, or a materially adverse diminution of the overall level of his
responsibilities, or a material breach by us of any term or provision of the
employment agreement or after a change of control, or any personal reason that
the Board or the Compensation Committee of the Board in its discretion
determines shall constitute “Good Reason.”
In
the
event of a “Change of Control” (as defined below), if the employee is terminated
without cause or he terminates his employment for good reason at any time during
the three year period following the Change of Control, the employee will be
entitled to the following: all outstanding stock options granted on or prior
to
the Change of Control shall become immediately exercisable and shall remain
exercisable for a period of three years, a lump-sum payment equal to three
times
the employee’s then current base
35
salary,
a
lump-sum payment equal to three times the highest annual bonus allowed under
the
Executive Bonus Plan during the three year period preceding the date of the
Change of Control, and continued medial and dental coverage for three years
from
the termination date at no cost to the employee.
For
purposes of the agreement, a “Change of Control” means: a tender offer for more
than 25% of the outstanding voting securities of the company; the company is
merged or consolidated with another corporation, and as a result of the
transaction, less than 75% of the outstanding voting securities of the resulting
corporations are beneficially owned by stockholders of the company immediately
prior to the transaction; the company sells all or substantially all of its
assets to another entity that is not a wholly-owned subsidiary; during any
15-month period, individuals who at the beginning of such period constituted
the
board of directors of the company (including any new member whose election
was
approved by at least 2/3 of the members of the board of directors then still
in
office who were members at the beginning of such period) cease for any reason
to
constitute at least a majority of the board of directors; the Compensation
Committee of the Board of Directors determines, in its sole discretion, that
a
change of control has occurred; or 80% or more of the outstanding voting
securities of the company are acquired by any person or entity other than the
company, its subsidiaries or its affiliates.
The
employment agreement with each of these employees requires them to devote such
of his business time, attention and energies to the business of the Company
as
are reasonably necessary to perform his duties under this Agreement. The
agreements also restrict the employee from engaging in any other business
activity, whether or not pursued for gain, profit or other pecuniary advantage,
which would impair his ability to fulfill his duties to the Company under this
Agreement, without the prior written consent of the Board. As disclosed
herein, each of these officers and employees is concurrently serving as an
officer or employee of Standard Drilling, Inc. Such service has been approved
by
the Company's Board of Directors.
Mr. Tomlinson, Mr. Moses and Mr. Pennington are also employed by Standard Drilling, Inc. and serve as its Chairman and CEO, President, CFO and treasurer, respectively. In addition to these individuals, Standard Drilling has a number of other officers, including several vice presidents, and its own staff. Standard Drilling pays the officers salaries comparable to, and in some cases greater than, the salaries we pay them. Currently, Mr. Tomlinson and Mr. Moses are paid approximately $20,000 more per year by Standard Drilling than by us. As a result, each of these officers devotes some of their business time to the management of our business and some to the management of Standard Drilling’s business. Because of our relatively small sizes and the early stages of business development, neither we nor Standard Drilling have developed rigid management processes or procedures. Our management does not divide its time between our business and Standard Drilling’s business on any fixed schedule, but rather based on the particular needs of each company on a day-to-day basis. As a result, the amount of time devoted to the management of our business and the management of Standard Drilling’s business by each of these officers fluctuates from day to day and week to week. Each of the officers has significant discretion as to whether to devote time to management of our business or to management of Standard Drilling’s business. In addition, our officers and directors directly or indirectly own approximately 34% of Standard Drilling, and approximately 38% of our outstanding common stock. As a result of the salaries paid to them by, their fiduciary duties to, and their ownership of a substantial interest in, Standard Drilling, or for any other reason, one or more of our officers may devote his time exclusively to the management of Standard Drilling for an extended period of time. These officers, together with Mr. Anderson, who is also a director of Standard Drilling, and Mr. Buntain, who is a stockholder of Standard Drilling, currently constitute 80% of the members of our Board of Directors. Because, as described above, there are no specific time requirements governing whether our officers are devoting sufficient time to managing our business, the supervision of these officers’ performance by directors without any conflict of interest regarding Standard Drilling is likely to be limited to the oversight provided by Mr. Drouet.
36
The
following table sets forth the number of shares of our common stock beneficially
owned as of June 15, 2006 by:
| · |
those
persons or groups known to beneficially own more than 5% of our common
stock;
|
| · |
each
of our executive officers and directors;
and
|
| · |
all
of our directors and executive officers as a
group.
|
For
purposes of this table, beneficial ownership is determined in accordance with
Rule 13d-3 promulgated under the Securities Exchange Act of 1934. Except as
indicated below, the security holders listed possess sole voting and investment
power with respect to the shares beneficially owned by that person.
|
Name
and Address(1)
|
Common
Stock
|
Ownership
(%)(2)
|
|
||||
|
Prentis
B. Tomlinson, Jr.(3)
|
19,810,000
|
31.63
|
%
|
||||
|
Edward
L. Moses, Jr. (4)
|
1,750,000
|
2.77
|
%
|
||||
|
W.
Richard Anderson (4)
|
400,000
|
*
|
|||||
|
O.
Oliver Pennington, III (4)
|
625,000
|
*
|
|||||
| Derek L. Buntain(5) |
843,750
|
*
|
|||||
|
William
B. Nunnallee (4)
|
200,000
|
*
|
|||||
| Kirwin L. Drouet |
-
|
* | |||||
|
All
executive officers and directors as a group
(7
persons):
|
24,267,750
|
37.73
|
%
|
||||
|
*
|
Represents
less than 1% of the issued and outstanding shares of common
stock.
|
|
(1)
|
Except
as otherwise noted, the street address of the named beneficial owner
is
1667 K Street, NW, Suite 1230, Washington, DC
20006.
|
|
(2)
|
Based
on a total of (i) 62,350,806 shares of common stock issued and
outstanding
on January 12, 2007, plus (ii) shares that may be issued upon
exercise of options that are exercisable within 60
days.
|
|
(3)
|
Includes
(i)4,540,000 shares of stock owned directly, (ii) 15,000,000 shares
of
stock held by Calibre Energy Partners, LLC., which Mr. Tomlinson
controls,
and (iii) 270,000 shares of common stock to be issued upon the exercise
of
warrants.
|
|
(4)
|
Represents
shares of common stock that may be acquired upon exercise of options
in
the next 60 days.
|
|
(5)
|
Includes
(i) 562,500 shares of stock held by Balmoral Holdings, Ltd which Mr.
Buntain controls, plus (ii) 281,250 shares of common stock
to be issued upon the exercise of
warrants.
|
37
No
stockholder may offer or sell shares of our common stock under this prospectus
unless such stockholder has notified us of his or her intention to sell shares
of our common stock and this prospectus has been declared effective by the
SEC,
and remains effective at the time such selling stockholder offers or sells
such
shares. We are required to amend this prospectus to reflect material
developments in our business, financial position and results of operations.
Each
time we file an amendment to this prospectus with the SEC, it must first be
declared effective prior to the offer or sale of shares of our common stock
by
the selling stockholders.
The
common
stock covered by this prospectus is to be offered for the account of the selling
stockholders in the following table. The selling stockholders may from time
to
time sell all, some or none of the shares of common stock offered by this
prospectus.
The
following table, which we have prepared based on information provided to us
by
the applicable selling stockholder, sets forth the name, the number of shares
of
common stock beneficially owned by the selling stockholders intending to sell
our common stock and the number of shares of common stock to be offered. Unless
set forth below, none of the selling stockholders selling in connection with
the
prospectus has held any position or office with, been employed by, or otherwise
has had a material relationship with us or any of our affiliates during the
three years prior to the date of the prospectus.
|
Name
of Selling Stockholder
|
Footnote
|
Number
of
Shares of Common Stock Beneficially Owned (1) |
Number
of Shares
of Common Stock Offered Hereunder |
Number
and % of
Outstanding Shares of Common Stock Owned After Completion of Offering |
|
|
Number
|
%
(2)
|
||||
|
Calibre
Energy Partners, LLC
|
15,000,000
|
15,000,000
|
0
|
*
|
|
|
International
Capital Advisory, Inc.
|
(3)
|
1,796,025
|
1,796,025
|
0
|
*
|
| Greg Reid | 15,000 | 15,000 | 0 | * | |
| Ross Geiger | 20,000 | 20,000 | 0 | * | |
| Tracy Black | 20,000 | 20,000 | 0 | * | |
|
Jonpol
Investments, Ltd.
|
(4)
|
1,500,000
|
1,500,000
|
0
|
*
|
|
Sherrie
Ann Pollock
|
1,500,000
|
1,500,000
|
0
|
*
|
|
|
Rob
Pollock
|
1,500,000
|
1,500,000
|
0
|
*
|
|
|
Mark
Monaghan
|
500,000
|
500,000
|
0
|
*
|
|
|
Laura
Bester
|
500,000
|
500,000
|
0
|
*
|
|
|
Richard
D. Hutcheon
|
(5)
|
375,000
|
375,000
|
0
|
*
|
|
Maynard
Young
|
(6)
|
187,500
|
187,500
|
0
|
*
|
|
Hybrid
Investments, Ltd.
|
(7)
|
750,000
|
750,000
|
0
|
*
|
|
BMO
Nesbitt Burns ITF Sheldon Taerk a/c 405-110005-29
|
(8)
|
112,500
|
112,500
|
0
|
*
|
|
Beads
A. D'Cruz
|
(9)
|
75,000
|
75,000
|
0
|
*
|
|
Blue
Sky Private Equity, Inc.
|
(10)
|
937,500
|
937,500
|
0
|
*
|
38
|
Name
of Selling Stockholder
|
Footnote
|
Number
of
Shares of Common Stock Beneficially Owned (1) |
Number
of Shares
of Common Stock Offered Hereunder |
Number
and % of
Outstanding Shares of Common Stock Owned After Completion of Offering |
|
|
Number
|
%
(2)
|
||||
|
|
|||||
|
Donald
R. Hutcheon
|
(11)
|
37,500
|
37,500
|
0
|
*
|
|
G.
Scott Paterson
|
(12)
|
187,500
|
187,500
|
0
|
*
|
|
Danya
Ossip-Richmor
|
(13)
|
37,500
|
37,500
|
0
|
*
|
|
Amanda
Lisus
|
(14)
|
462,500
|
462,500
|
0
|
*
|
|
David
Meyerowitz
|
(15)
|
150,000
|
150,000
|
0
|
*
|
|
Peter
Turk
|
(16)
|
225,000
|
225,000
|
0
|
*
|
|
Gail
Cooper
|
(17)
|
187,500
|
187,500
|
0
|
*
|
|
Philip
Turk & Nanci Turk
|
(18)
|
187,500
|
187,500
|
0
|
*
|
|
Daniel
Rappaport
|
(19)
|
93,750
|
93,750
|
0
|
*
|
|
Joseph
H. Levitan
|
(20)
|
225,000
|
225,000
|
0
|
*
|
|
Haywood
Securities Inc ITF Laura Bester Acct. #TM12210C
|
(21)
|
750,000
|
750,000
|
0
|
*
|
|
Stephen
Bloom
|
(22)
|
93,750
|
93,750
|
0
|
*
|
|
Art
Heller Enterprises
|
(23)
|
187,500
|
187,500
|
0
|
*
|
|
Barbra
H. Miller
|
(24)
|
75,000
|
75,000
|
0
|
*
|
|
Investor
Company ITF Acct. #5N0843F
|
(25)
|
1,028,018
|
1,028,018
|
0
|
|
|
Gundyco
ITF The K2 Principal Fund
|
(26)
|
450,000
|
450,000
|
0
|
*
|
|
Investor
Company ITF Acct. #5J5047C
|
(27)
|
97,500
|
97,500
|
0
|
*
|
|
Royal
Trust ITF AIG Global Investment Corp.
|
(28)
|
1,500,000
|
1,500,000
|
0
|
*
|
|
Jennifer
MacKenzie
|
(29)
|
375,000
|
375,000
|
0
|
*
|
|
Sean
Cleary
|
-
|
67,788
|
67,788
|
0
|
*
|
|
NBCN
Clearing, Inc. ITF Acct. #4NA066E
|
(30)
|
2,000,000
|
2,000,000
|
0
|
*
|
|
Brant
Investments Ltd, Acct. #108483245
|
(31)
|
600,000
|
600,000
|
0
|
|
|
Systems
on Time Inc.
|
(32)
|
225,000
|
225,000
|
0
|
*
|
|
NBCN
Clearing Inc. ITF 1395515 Ontario Ltd. Acct 4NRE91E
|
(33)
|
100,500
|
100,500
|
0
|
*
|
|
Eric
Abecassis
|
(34)
|
93,750
|
93,750
|
0
|
*
|
|
The
Stuart Copelovitch Family Trust
|
(35)
|
93,750
|
93,750
|
0
|
*
|
|
The
Melger Family Trust
|
(36)
|
93,750
|
93,750
|
0
|
*
|
|
The
Jalary Family Trust
|
(37)
|
93,750
|
93,750
|
0
|
*
|
|
D.
Robb English
|
(38)
|
18,750
|
18,750
|
0
|
*
|
|
Maxsamm
Holdings Inc.
|
(39)
|
93,750
|
93,750
|
0
|
*
|
39
|
Name
of Selling Stockholder
|
Footnote
|
Number
of
Shares of Common Stock Beneficially Owned (1) |
Number
of Shares
of Common Stock Offered Hereunder |
Number
and % of
Outstanding Shares of Common Stock Owned After Completion of Offering |
|
|
Number
|
%
(2)
|
||||
|
Lony
Gropper
|
(40)
|
150,000
|
150,000
|
0
|
*
|
|
Kerry
Salsberg
|
(41)
|
60,000
|
60,000
|
0
|
*
|
|
Richard
Elder
|
(42)
|
300,000
|
300,000
|
0
|
*
|
|
Patrick
Mark Whitman
|
(43)
|
30,000
|
30,000
|
0
|
*
|
|
Allan
Weinbaum
|
(44)
|
112,500
|
112,500
|
0
|
*
|
|
Leslie
Amoils
|
(45)
|
150,000
|
150,000
|
0
|
*
|
|
Coldstream
Capital Ventures
|
(46)
|
93,750
|
93,750
|
0
|
*
|
|
Mitch
Aidelman
|
(47)
|
45,000
|
45,000
|
0
|
*
|
|
Steven
Graff
|
(48)
|
75,000
|
75,000
|
0
|
*
|
|
J.
Russell Starr
|
(49)
|
75,000
|
75,000
|
0
|
*
|
|
Kevin
Everingham
|
(50)
|
105,000
|
105,000
|
0
|
*
|
|
Trevor
M. Born
|
(51)
|
93,750
|
93,750
|
0
|
*
|
|
Brian
Udashkin
|
(52)
|
375,000
|
375,000
|
0
|
*
|
|
Richard
Epstein
|
(53)
|
18,750
|
18,750
|
0
|
*
|
|
Joel
Goodman
|
(54)
|
18,750
|
18,750
|
0
|
*
|
|
David
Shiller
|
(55)
|
18,750
|
18,750
|
0
|
*
|
|
Lawrence
Allen Dentistry Professional Corporation
|
(56)
|
150,000
|
150,000
|
0
|
*
|
|
The
Tobin Family Trust
|
(57)
|
1,750,000
|
1,750,000
|
0
|
*
|
|
Sigmund
Soudack
|
(58)
|
1,750,000
|
1,750,000
|
0
|
*
|
|
Jennifer
Goldman
|
(59)
|
75,000
|
75,000
|
0
|
*
|
|
Mary
Sinclair
|
(60)
|
300,000
|
300,000
|
0
|
*
|
|
Mary
Sinclair ITF Christopher Sinclair
|
(61)
|
300,000
|
300,000
|
0
|
*
|
|
Mary
Sinclair ITF Candice Sinclair
|
(62)
|
300,000
|
300,000
|
0
|
*
|
|
Bruce
Kagan
|
(63)
|
75,000
|
75,000
|
0
|
*
|
|
Mark
Monaghan
|
(64)
|
150,000
|
150,000
|
0
|
*
|
|
Charles
Berger
|
(65)
|
93,750
|
93,750
|
0
|
*
|
|
Hsin-Yuan
Su
|
(66)
|
225,000
|
225,000
|
0
|
*
|
|
Steve
Shinoff
|
(67)
|
56,250
|
56,250
|
0
|
*
|
|
RBC
Dominion Securities Inc. ITF Stephanie Shields a/c
4113029922
|
(68)
|
37,500
|
37,500
|
0
|
*
|
|
Tracie
Graff
|
(69)
|
93,750
|
93,750
|
0
|
*
|
|
RBC
Dominion Securities Inc. ITF Melvin M. Gilbert Acct
#4214855316
|
(70)
|
93,750
|
93,750
|
0
|
*
|
|
JMM
Trading LP
|
(71)
|
375,000
|
375,000
|
0
|
*
|
40
|
Name
of Selling Stockholder
|
Footnote
|
Number
of
Shares of Common Stock Beneficially Owned (1) |
Number
of Shares
of Common Stock Offered Hereunder |
Number
and % of
Outstanding Shares of Common Stock Owned After Completion of Offering |
|
|
Number
|
%
(2)
|
||||
|
Placements
Peloton, Inc.
|
(72)
|
187,500
|
187,500
|
0
|
*
|
|
David
Turk
|
(73)
|
112,500
|
112,500
|
0
|
*
|
|
Pat
and Rosa Dicerbo
|
(74)
|
562,500
|
562,500
|
0
|
*
|
|
NBCN
Clearing Inc, FBO a/c 2QE027F
|
(75)
|
56,250
|
56,250
|
0
|
*
|
|
Frank
Davis
|
(76)
|
75,000
|
75,000
|
0
|
*
|
|
Michael
Bowen
|
(77)
|
37,500
|
37,500
|
0
|
*
|
|
Brant
Investments Ltd, Acct. #108483245
|
(78)
|
750,000
|
750,000
|
0
|
*
|
|
Robert
Pollock
|
(79)
|
600,750
|
600,750
|
0
|
*
|
|
Andrew
Martyn
|
(80)
|
150,000
|
150,000
|
0
|
*
|
|
Scott
Kelly
|
(81)
|
150,000
|
150,000
|
0
|
*
|
|
Royal
Trust ITF Acct. #110748003
|
(82)
|
562,500
|
562,500
|
0
|
*
|
|
Royal
Trust ITF Acct. #110455171
|
(83)
|
281,250
|
281,250
|
0
|
*
|
|
Joel
Leonoff
|
(84)
|
375,000
|
375,000
|
0
|
*
|
|
Robert
Metz
|
(85)
|
60,000
|
60,000
|
0
|
*
|
|
NBCN
Clearing Inc ITF Angelo Comi Acct. #3ME239F
|
(86)
|
150,000
|
150,000
|
0
|
*
|
|
Prentis
B. Tomlinson, Jr.
|
(87)
|
19,810,000
|
810,000
|
15,000,000
|
24.06%
|
|
Gary
D. May
|
(88)
|
375,000
|
375,000
|
0
|
*
|
|
Ross
J. Jicomelli
|
(89)
|
150,000
|
150,000
|
0
|
*
|
|
Ann
W. Mullen
|
(90)
|
37,500
|
37,500
|
0
|
*
|
|
Donald
F. Farley
|
(91)
|
375,000
|
375,000
|
0
|
*
|
|
Kenneth
D. Cushman, MD
|
(92)
|
225,000
|
225,000
|
0
|
*
|
|
Edmund
Wylie Johnson and Margaret E. Johnson
|
(93)
|
375,000
|
375,000
|
0
|
*
|
|
Allan
Tissenbaum
|
(94)
|
93,750
|
93,750
|
0
|
*
|
|
Kevin
A. Wechter
|
(95)
|
75,000
|
75,000
|
0
|
*
|
|
Jennifer
Siverston
|
(96)
|
75,000
|
75,000
|
0
|
*
|
|
Myro
Louis Panas
|
(97)
|
566,250
|
566,250
|
0
|
*
|
|
William
Todd Isaac
|
(98)
|
581,250
|
581,250
|
0
|
*
|
|
Marc-Andre
Lavoie
|
(99)
|
93,750
|
93,750
|
0
|
*
|
|
Ronald
Kopas
|
(100)
|
37,500
|
37,500
|
0
|
*
|
|
Kenneth
Ari Weinstein
|
(101)
|
2,073,125
|
2,073,125
|
0
|
*
|
|
Infogroup
Ltd.
|
(102)
|
93,750
|
93,750
|
0
|
*
|
|
Powdersmart.com
SRL
|
(103)
|
375,000
|
375,000
|
0
|
*
|
41
|
Name
of Selling Stockholder
|
Footnote
|
Number
of
Shares of Common Stock Beneficially Owned (1) |
Number
of Shares
of Common Stock Offered Hereunder |
Number
and % of
Outstanding Shares of Common Stock Owned After Completion of Offering |
|
|
Number
|
%
(2)
|
||||
|
Balmoral
Holdings Ltd
|
(104)
|
843,750
|
843,750
|
0
|
*
|
|
Danjor
Holdings Inc.
|
(105)
|
375,000
|
375,000
|
0
|
*
|
|
Sam
Segal
|
(106)
|
375,000
|
375,000
|
0
|
*
|
|
Michael
Regan
|
(107)
|
75,000
|
75,000
|
0
|
*
|
|
Luke
Frazier
|
(108)
|
425,000
|
425,000
|
0
|
*
|
|
Dundee
Securities Corp. ITF Quest Securities Acct #862854A
|
(109)
|
875,000
|
875,000
|
0
|
*
|
|
Kystie
Finance Ltd.
|
(110)
|
3,184,150
|
3,184,150
|
0
|
*
|
|
Susan
Tobin
|
(111)
|
599,250
|
599,250
|
0
|
*
|
|
Steve
Graff
|
(112)
|
8,000
|
8,000
|
0
|
*
|
|
Ritchie
Epstein
|
(113)
|
13,100
|
13,100
|
0
|
*
|
|
Gerry
Tissenbaum
|
(114)
|
49,000
|
49,000
|
0
|
*
|
|
Steve
Blustein
|
(115)
|
2,000
|
2,000
|
0
|
*
|
|
NBCN
Clearing ITF 4N-A081-E
|
(116)
|
175,000
|
175,000
|
0
|
*
|
|
3813983
Canada Inc.
|
(117)
|
50,000
|
50,000
|
0
|
*
|
|
Alcina
Corporation
|
(118)
|
50,000
|
50,000
|
0
|
*
|
|
Bill
Kemp
|
(119)
|
75,000
|
75,000
|
0
|
*
|
|
Bob
Richardson
|
(120)
|
22,000
|
22,000
|
0
|
*
|
|
Boyd
Roberton
|
(121)
|
20,000
|
20,000
|
0
|
*
|
|
T
Finn & Co.
|
(122)
|
3,428,571
|
3,428,571
|
0
|
*
|
|
UBS
AG
|
(123)
|
571,429
|
571,429
|
0
|
*
|
|
Carter
H. Compton
|
(124)
|
8,500
|
8,500
|
0
|
*
|
|
Fred
Dulock
|
(125)
|
50,000
|
50,000
|
0
|
*
|
|
Galen
R. Logan
|
(126)
|
5,000
|
5,000
|
0
|
*
|
|
Gary
Uptmore
|
(127)
|
8,000
|
8,000
|
0
|
*
|
|
George
Kubala
|
(128)
|
16,000
|
16,000
|
0
|
*
|
|
Irwin
Zeiniker
|
(129)
|
100,000
|
100,000
|
0
|
*
|
|
Isaac
Hamaoui
|
(130)
|
25,000
|
25,000
|
0
|
*
|
|
Jeff
Kilburn
|
(131)
|
5,000
|
5,000
|
0
|
*
|
|
Jim
Phillips
|
(132)
|
25,350
|
25,350
|
0
|
*
|
|
Joe
Dillon
|
(133)
|
10,000
|
10,000
|
0
|
*
|
|
Joel
Milgram
|
(134)
|
100,000
|
100,000
|
0
|
*
|
|
John
Korence
|
(135)
|
10,000
|
10,000
|
0
|
*
|
|
Johnny
KM Chan
|
(136)
|
200,000
|
200,000
|
0
|
*
|
42
|
Name
of Selling Stockholder
|
Footnote
|
Number
of
Shares of Common Stock Beneficially Owned (1) |
Number
of Shares
of Common Stock Offered Hereunder |
Number
and % of
Outstanding Shares of Common Stock Owned After Completion of Offering |
|
|
Number
|
%
(2)
|
||||
|
Khatchig
Aghazarian
|
(137)
|
100,000
|
100,000
|
0
|
*
|
|
Kodiak
Metals LLC
|
(138)
|
500,000
|
500,000
|
0
|
*
|
|
L.S.J.
|
(139)
|
100,000
|
100,000
|
0
|
*
|
|
Michael
Stroll
|
(140)
|
50,000
|
50,000
|
0
|
*
|
|
Pasquale
DiCerbo
|
(141)
|
100,000
|
100,000
|
0
|
*
|
|
Peter
Rebmann
|
(142)
|
25,000
|
25,000
|
0
|
*
|
|
Philip
Turk
|
(143)
|
37,500
|
37,500
|
0
|
*
|
|
Pierre
Gabison
|
(144)
|
100,000
|
100,000
|
0
|
*
|
|
Rick
Shelton
|
(145)
|
20,000
|
20,000
|
0
|
*
|
|
Ricky
D. Thompson
|
(146)
|
5,000
|
5,000
|
0
|
*
|
|
Ross
Hunt
|
(147)
|
25,000
|
25,000
|
0
|
*
|
|
Sam
X. Eyde
|
(148)
|
440,000
|
440,000
|
0
|
*
|
|
Stanley
Gill
|
(149)
|
50,000
|
50,000
|
0
|
*
|
|
William
R. Brewer
|
(150)
|
30,000
|
30,000
|
0
|
*
|
|
ING
Bank S.A.
|
(151)
|
2,500,000
|
2,500,000
|
0
|
*
|
|
Larry
R. Cramer
|
(152)
|
20,000
|
20,000
|
0
|
*
|
|
Kathryne
S. Cramer
|
(153)
|
5,000
|
5,000
|
0
|
*
|
|
Douglas
R. Hamilton
|
(154)
|
10,000
|
10,000
|
0
|
*
|
|
Owen
G. Anderson
|
(155)
|
5,000
|
5,000
|
0
|
*
|
|
GLG
North American Opportunity Fund
|
(156)
|
2,500,000
|
2,500,000
|
0
|
*
|
|
JMM
Trading LP
|
(157)
|
100,000
|
100,000
|
0
|
*
|
|
Continental
Trust Corporation Ltd.
|
(158)
|
100,000
|
100,000
|
0
|
*
|
|
Inversiones
y Negocios Estrategicos SA
|
(159)
|
125,000
|
125,000
|
0
|
*
|
|
Edward
L. Moses
|
(160)
|
1,750,000
|
750,000
|
750,000
|
1.20%
|
| 2829916 Canada Inc. |
(161)
|
25,000 | 25,000 | 0 | * |
| Mida Investements |
(162)
|
20,000 | 20,000 | 0 | * |
|
(1)
Beneficial ownership is determined in accordance with the rules of
the
Securities and Exchange Commission
and generally includes voting or investment power with respect to
securities. Shares of common
stock subject to options or warrants currently exercisable within
60 days
of May 5, 2006 are
deemed outstanding for computing the percentage of the person holding
such
option or warrant are
deemed outstanding for computing the percentage of the person holding
such
option or warrant but
are not deemed outstanding for computing the percentage of any other
person.
|
|
(2)
Percentage is based on 62,350,806 shares of common stock
outstanding.
|
|
(3)
International Capital Advisory, Inc. Includes 296,025 shares of common
stock underlying warrants for placement agent activities. Tracey
Tobin has
the power to vote and dispose of the Calibre Energy common stock
owned by
International Capital Advisory,
Inc.
|
43
|
(4)
John A. Pollock and Barbara C. Pollock exercise voting and dispositive
power over all of the shares beneficially owned by Jonpol Investments,
Ltd.
|
|
(5)
Includes 125,000 shares of common stock underlying
warrants.
|
|
(6)
Includes 62,500 shares of common stock underlying
warrants.
|
|
(7)
Robert Green exercises voting and dispositive power over all of the
shares
beneficially owned by Hybrid Investments, Ltd. Includes 250,000 shares
of
common stock underlying warrants.
|
|
(8)
Sheldon Taerk exercises voting and dispositive power over all of
the
shares beneficially owned by BMO Nesbitt Burns ITF Sheldon Taerk
a/c
405-110005-29. Includes 37,500 shares of common stock underlying
warrants.
|
|
(9)
Includes 25,000 shares of common stock underlying
warrants.
|
|
(10)
Gregory Wolfond exercises voting and dispositive power over all of
the
shares beneficially owned by Blue Sky Private Equity, Inc. Includes
312,500 shares of common stock underlying
warrants.
|
|
(11)
Includes 12,500 shares of common stock underlying
warrants.
|
|
(12)
Includes 62,500 shares of common stock underlying
warrants.
|
|
(13)
Includes 12,500 shares of common stock underlying
warrants.
|
|
(14)
Includes 162,500 shares of common stock underlying
warrants.
|
|
(15)
Includes 50,000 shares of common stock underlying
warrants.
|
|
(16)
Includes 81,250 shares of common stock underlying
warrants.
|
|
(17)
Includes 62,500 shares of common stock underlying
warrants.
|
|
(18)
Includes 62,500 shares of common stock underlying
warrants.
|
|
(19)
Includes 31,250 shares of common stock underlying
warrants.
|
|
(20)
Includes 75,000 shares of common stock underlying
warrants.
|
|
(21)
Laura Bester exercises voting and dispositive power over all of the
shares
beneficially owned by Haywood Securities Inc ITF Laura Bester Acct.
#TM12210C. Includes 250,000 shares of common stock underlying
warrants.
|
|
(22)
Includes 31,250 shares of common stock underlying
warrants.
|
|
(23)
Jodi Heller exercises voting and dispositive power over all of the
shares
beneficially owned by Art Heller Enterprises. Includes 62,500 shares
of
common stock underlying warrants.
|
|
(24)
Includes 25,000 shares of common stock underlying
warrants.
|
|
(25)
Dean Curtis exercises voting and dispositive power over all of the
shares
beneficially owned by Investor Company ITF Acct.
#5N0843F.
|
|
(26)
Shawn Kimel exercises voting and dispositive power over all of the
shares
beneficially owned by Gundyco ITF The K2 Principal Fund. Includes
150,000
shares of common stock underlying
warrants.
|
|
(27)
Richard Kung exercises voting and dispositive power over all of the
shares
beneficially owned by Investor Company ITF Acct. #5J5047C. Includes
32,500
shares of common stock underlying
warrants.
|
|
(28)
Steven Palmer exercises voting and dispositive power over all of
the
shares beneficially owned by Royal Trust ITF AIG Global Investment
Corp.
Includes 500,000 shares of common stock underlying
warrants.
|
44
|
(29)
Steven Palmer exercises voting and dispositive power over all of
the
shares beneficially owned by Jennifer MacKenzie. Includes 125,000
shares
of common stock underlying
warrants.
|
|
(30)
Glenn Pountney exercises voting and dispositive power over all
of the
shares beneficially owned by NBCN Clearing, Inc. ITF Acct. #4NA066E.
Includes 1,000,000 shares of common stock underlying
warrants.
|
|
(31)
Cecilia M. Kershaw exercises voting and dispositive power over all
of the
shares beneficially owned by Brant Investments Ltd, Acct. #108483245.
Includes 200,000 shares of common stock underlying
warrants.
|
|
(32)
Joseph Bensadoun exercises voting and dispositive power over all
of the
shares beneficially owned by Systems on Time Inc. Includes 75,000
shares
of common stock underlying
warrants.
|
|
(33)
Ross McMaster exercises voting and dispositive power over all of
the
shares beneficially owned by NBCN Clearing Inc. ITF 1395515 Ontario
Ltd.
Acct 4NRE91E. Includes 33,500 shares of common stock underlying
warrants.
|
|
(34)
Includes 31,250 shares of common stock underlying
warrants.
|
|
(35)
Stuart Copelovitch exercises voting and dispositive power over all of
the shares beneficially owned by The Stuart Copecovitch Family Trust.
Includes 31,250 shares of common stock underlying
warrants.
|
|
(36)
Gerald Isaac Weinstein and Edward Glen Weinstein exercise voting
and
dispositive power over all of the shares beneficially owned by The
Melger
Family Trust. Includes 31,250 shares of common stock underlying
warrants.
|
|
(37)
Jacob Weinstein and Gerald Isaac Weinstein exercise voting and dispositive
power over all of the shares beneficially owned by The Jalary Family
Trust. Includes 31,250 shares of common stock underlying
warrants.
|
|
(38)
Includes 6,250 shares of common stock underlying
warrants.
|
|
(39)
Andrew Prenick exercises voting and dispositive power over all of
the
shares beneficially owned by Maxsamm Holdings Inc. Includes 31,250
shares
of common stock underlying
warrants.
|
|
(40)
Includes 50,000 shares of common stock underlying
warrants.
|
|
(41)
Includes 20,000 shares of common stock underlying
warrants.
|
|
(42)
Includes 100,000 shares of common stock underlying
warrants.
|
|
(43)
Includes 10,000 shares of common stock underlying
warrants.
|
|
(44)
Includes 37,500 shares of common stock underlying
warrants.
|
|
(45)
Includes 50,000 shares of common stock underlying
warrants.
|
|
(46)
Daniel Pharand exercises voting and dispositive power over all of
the
shares beneficially owned by Coldstream Capital Ventures. Includes
31,250
shares of common stock underlying
warrants.
|
|
(47)
Includes 15,000 shares of common stock underlying
warrants.
|
|
(48)
Includes 25,000 shares of common stock underlying
warrants.
|
|
(49)
Includes 25,000 shares of common stock underlying
warrants.
|
|
(50)
Includes 35,000 shares of common stock underlying
warrants.
|
|
(51)
Includes 31,250 shares of common stock underlying
warrants.
|
45
|
(52)
Includes 125,000 shares of common stock underlying
warrants.
|
|
(53)
Includes 6,250 shares of common stock underlying
warrants.
|
|
(54)
Includes 6,250 shares of common stock underlying
warrants.
|
|
(55)
Includes 6,250 shares of common stock underlying
warrants.
|
|
(56)
Lawrence Allen exercises voting and dispositive power over all of
the
shares beneficially owned by Lawrence Allen Dentistry Professional
Corporation. Includes 50,000 shares of common stock underlying
warrants.
|
|
(57)
Morrie Tobin exercises voting and dispositive power over all of the
shares
beneficially owned by The Tobin Family Trust. Includes 250,000 shares
of
common stock underlying warrants.
|
|
(58)
Includes 625,000 shares of common stock underlying
warrants.
|
|
(59)
Includes 25,000 shares of common stock underlying
warrants.
|
|
(60)
Includes 100,000 shares of common stock underlying
warrants.
|
|
(61)
Mary Sinclair exercises voting and dispositive power over all of
the
shares beneficially owned by Mary Sinclair ITF Christopher Sinclair.
Includes 100,000 shares of common stock underlying
warrants.
|
|
(62)
Mary Sinclair exercises voting and dispositive power over all of
the
shares beneficially owned by Mary Sinclair ITF Candice Sinclair.
Includes
100,000 shares of common stock underlying
warrants.
|
|
(63)
Includes 25,000 shares of common stock underlying
warrants.
|
|
(64)
Includes 50,000 shares of common stock underlying
warrants.
|
|
(65)
Includes 31,250 shares of common stock underlying
warrants.
|
|
(66)
Includes 81,250 shares of common stock underlying
warrants.
|
|
(67)
Includes 18,750 shares of common stock underlying
warrants.
|
|
(68)
Stephanie Shields exercises voting and dispositive power over all
of the
shares beneficially owned by RBC Dominion Securities Inc. ITF Stephanie
Shields a/c 4113029922. Includes 12,500 shares of common stock underlying
warrants.
|
|
(69)
Includes 31,250 shares of common stock underlying
warrants.
|
|
(70)
Melvin Gilbert exercise voting and dispositive power over all of
the
shares beneficially owned by RBC Dominion Securities Inc. ITF Melvin
M.
Gilbert Acct #4214855316. Includes 31,250 shares of common stock
underlying warrants.
|
|
(71)
Glenn Hunt and Richard Hennig exercise voting and dispositive power
over
all of the shares beneficially owned by JMM Trading LP. Includes
125,000
shares of common stock underlying
warrants.
|
|
(72)
Mark Dichter exercises voting and dispositive power over all of the
shares
beneficially owned by Placements Peloton, Inc. Includes 62,500 shares
of
common stock underlying warrants.
|
|
(73)
Includes 43,750 shares of common stock underlying
warrants.
|
|
(74)
Includes 187,500 shares of common stock underlying
warrants.
|
|
(75)
John Cooke and Andrea Cooke exercise voting and dispositive power
over all
of the shares beneficially owned by NBCN Clearing Inc, FBO a/c 2QE027F.
Includes 18,750 shares of common stock underlying
warrants.
|
|
(76)
Includes 25,000 shares of common stock underlying
warrants.
|
46
|
(77)
Includes 12,500 shares of common stock underlying
warrants.
|
|
(78)
Cecilia M. Kershaw exercises voting and dispositive power over all
of the
shares beneficially owned by Brant Investments Ltd, Acct. #108483245.
Includes 250,000 shares of common stock underlying
warrants.
|
|
(79)
Includes 200,250 shares of common stock underlying
warrants.
|
|
(80)
Includes 50,000 shares of common stock underlying
warrants.
|
|
(81)
Includes 50,000 shares of common stock underlying
warrants.
|
|
(82)
Malvin Spooner exercises voting and dispositive power over all of
the
shares beneficially owned by Royal Trust ITF Acct. #110748003. Includes
187,500 shares of common stock underlying
warrants.
|
|
(83)
Malvin Spooner exercises voting and dispositive power over all of
the
shares beneficially owned by Royal Trust ITF Acct. #110455171. Includes
93,750 shares of common stock underlying
warrants.
|
|
(84)
Includes 125,000 shares of common stock underlying
warrants.
|
|
(85)
Includes 20,000 shares of common stock underlying
warrants.
|
|
(86)
Angelo Comi exercises voting and dispositive power over all of the
shares
beneficially owned by NBCN Clearing Inc ITF Angelo Comi Acct. #3ME239F.
Includes 50,000 shares of common stock underlying
warrants.
|
|
(87)
"Number
of Shares of Common Stock Beneficially Owned" includes (i) 270,000
shares
of common stock underlying warrants exercisable in the next 60 days,
(ii)
15,250,000 shares of common stock owned by Calibre Energy
Partners, LLC of which Mr. Tomlinson is the manager and has voting
and
dispositive power; the "Number and % of Outstanding Shares of Common
Stock
Owned
After Completion of Offering" include the shares underlying the options
and the shares owned by Calibre Energy Partners,
LLC.
|
|
(88)
Includes 125,000 shares of common stock underlying
warrants.
|
|
(89)
Includes 50,000 shares of common stock underlying
warrants.
|
|
(90)
Includes 12,500 shares of common stock underlying
warrants.
|
|
(91)
Includes 125,000 shares of common stock underlying
warrants.
|
|
(92)
Includes 75,000 shares of common stock underlying
warrants.
|
|
(93)
Includes 125,000 shares of common stock underlying
warrants.
|
|
(94)
Includes 31,250 shares of common stock underlying
warrants.
|
|
(95)
Includes 25,000 shares of common stock underlying
warrants.
|
|
(96)
Includes 25,000 shares of common stock underlying
warrants.
|
|
(97)
Includes 188,750 shares of common stock underlying
warrants.
|
|
(98)
Includes 193,750 shares of common stock underlying
warrants.
|
|
(99)
Includes 31,250 shares of common stock underlying
warrants.
|
|
(100)
Includes 12,500 shares of common stock underlying
warrants.
|
|
(101) Includes
773,125 shares of common stock underlying warrants. Kenneth Ari Weinstein
acquired 98,125 shares of common stock underlying warrants for placement
agent activities.
|
|
(102)
Maitland Cates and Jason Chapnik exercise voting and dispositive
power
over all of the shares beneficially owned by Infogroup Ltd. Includes
31,250 shares of common stock underlying
warrants.
|
47
|
(103)
David Ades exercises voting and dispositive power over all of the
shares
beneficially owned by Powdersmart.com SRL. Includes 125,000 shares
of
common stock underlying warrants.
|
|
(104)
Derek H.L. Buntain exercises voting and dispositive power over all
of the
shares beneficially owned by Balmoral Holdings Ltd. Includes 281,250
shares of common stock underlying
warrants.
|
|
(105)
Bruce Gornitsky exercises voting and dispositive power over all of
the
shares beneficially owned by Danjor Holdings Inc. Includes 125,000
shares
of common stock underlying
warrants.
|
|
(106)
Includes 125,000 shares of common stock underlying
warrants.
|
|
(107)
Includes 25,000 shares of common stock underlying
warrants.
|
|
(108)
David Elkington exercises voting and dispositive power over all of
the
shares beneficially owned by Luke
Frazier.
|
|
(109)
Dundee Securities Corp. ITF Quest Securities Acct #862854A acquired
875,000 shares of common stock underlying warrants for placement
agent
activities. Robert Pollock has the power to vote and dispose of the
Calibre Energy common stock owned by Dundee Securities Corp. ITF
Quest
Securities Acct #862854A.
|
|
(110)
Mario Staggl exercises voting and dispositive power over all of the
shares
beneficially owned by Kystie Finance Ltd. Kystie Finance Ltd.
acquired 684,150 shares of common stock underlying warrants for
placement agent activities.
|
|
(111)
Susan Tobin acquired 199,250 shares of common stock underlying warrants
for placement agent activities.
|
|
(112)
Steve Graff acquired 8,000 shares of common stock underlying
warrants.
|
|
(113)
Ritchie Epstein acquired 13,100 shares of common stock underlying
warrants
for placement agent activities.
|
|
(114)
Gerry Tissenbaum acquired 49,000 shares of common stock underlying
warrants.
|
|
(115)
Steve Blustein 2,000 shares of common stock underlying
warrants.
|
|
(116)
NBCN Clearing ITF NA081-E acquired 175,000 shares of common stock
underlying warrants for placement agent activities. Glenn Pountney
has the
power to vote and dispose of the Calibre Energy common stock owned
by NBCN
Clearing ITF 4N-A081-E.
|
|
(117)
Antonio Merulla exercises voting and dispositive power over all of
the
shares beneficially owned by 3813983 Canada Inc. Includes 25,000
shares of
common stock underlying warrants.
|
|
(118)
David Brady, George Brady, Douglas Brady, Paul Brady, and Lara Brady
exercise voting and dispositive power over all of the shares beneficially
owned by Alcina Corporation. Includes 25,000 shares of common stock
underlying warrants.
|
|
(119)
Includes 37,500 shares of common stock underlying
warrants.
|
|
(120)
Bob Richardson acquired 22,000 shares of common stock underlying
warrants for placement agent
activities.
|
|
(121)
Includes 10,000 shares of common stock underlying
warrants.
|
|
(122)
Includes 428,571 shares of common stock underlying warrants.Danny Guy
and Brad White exercise voting and dispositive power over all of
the
shares beneficially owned by T Finn & Co.
|
|
(123)
Includes 71,429 shares of common stock underlying warrants.
Brad White and Brian Trenholm exercise voting and dispositive power
over
all of the shares beneficially owned by UBS AG.
|
|
(124)
Includes 4,250 shares of common stock underlying
warrants.
|
48
|
(125)
Includes 25,000 shares of common stock underlying
warrants.
|
|
(126)
Includes 2,500 shares of common stock underlying
warrants.
|
|
(127)
Includes 4,000 shares of common stock underlying
warrants.
|
|
(128)
Includes 8,000 shares of common stock underlying
warrants.
|
|
(129)
Includes 50,000 shares of common stock underlying
warrants.
|
|
(130)
Includes 12,500 shares of common stock underlying
warrants.
|
|
(131)
Includes 2,500 shares of common stock underlying
warrants.
|
|
(132)
Includes 8,750 shares of common stock underlying warrants. Jim Phillips
acquired 7,850 shares of common stock underlying warrants for placement
agent activities.
|
|
(133)
Includes 5,000 shares of common stock underlying
warrants.
|
|
(134)
Includes 50,000 shares of common stock underlying
warrants.
|
|
(135)
Includes 5,000 shares of common stock underlying
warrants.
|
|
(136)
Includes 100,000 shares of common stock underlying
warrants.
|
|
(137)
Includes 50,000 shares of common stock underlying
warrants.
|
|
(138)
David Jackson and Peter Rebmann exercise voting and dispositive power
over
all of the shares beneficially owned by Kodiak Metals LLC. Includes
250,000 shares of common stock underlying
warrants.
|
|
(139)
Ilias Kaperonis exercises voting and dispositive power over all of
the
shares beneficially owned by L.S.J. Includes 50,000 shares of common
stock
underlying warrants.
|
|
(140)
Includes 25,000 shares of common stock underlying
warrants.
|
|
(141)
Includes 50,000 shares of common stock underlying
warrants.
|
|
(142)
Peter Rebmann acquired 25,000 shares of common stock underlying warrants
for placement agent activities.
|
|
(143)
Includes 18,750 shares of common stock underlying
warrants.
|
|
(144)
Includes 50,000 shares of common stock underlying
warrants.
|
|
(145)
Includes 10,000 shares of common stock underlying
warrants.
|
|
(146)
Includes 2,500 shares of common stock underlying
warrants.
|
|
(147)
Includes 12,500 shares of common stock underlying
warrants.
|
|
(148)
Includes 220,000 shares of common stock underlying
warrants.
|
|
(149)
Includes 25,000 shares of common stock underlying
warrants.
|
|
(150)
Includes 15,000 shares of common stock underlying
warrants.
|
|
(151)
Philippe Jabre exercises voting and dispositive power over all of
the
shares beneficially owned by ING Bank S.A. Includes 1,250,000 shares
of
common stock underlying warrants.
|
|
(152)
Includes 10,000 shares of common stock underlying
warrants.
|
|
(153)
Includes 2,500 shares of common stock underlying
warrants.
|
49
|
(154)
Includes 5,000 shares of common stock underlying
warrants.
|
|
(155)
Includes 2,500 shares of common stock underlying
warrants.
|
|
(156)
Noam Gottesman, Pierre Lagrange, and Emmanuel Roman exercise voting
and
dispositive power over all of the shares beneficially owned by GLG
North
American Opportunity Fund. Includes 1,250,000 shares of common stock
underlying warrants.
|
|
(157)
Glenn Hunt and Richard Hunnig exercise voting and dispositive power
over
all of the shares beneficially owned by JMM Trading LP. Includes
50,000
shares of common stock underlying
warrants.
|
|
(158)
Dudley R. Cottingham, S. Arthur Morris, Colin G. Hames, R. Craig
Christensen, June I. Morris, and Christopher C. Morris exercise voting
and
dispositive power over all of the shares beneficially owned by Continental
Trust Corporation Ltd. Includes 50,000 shares of common stock underlying
warrants.
|
|
(159)
Inversiones y Negocios Estrategicos SA acquired 125,000 shares of
common stock underlying warrants for placement agent activities.
Malcolm P. Burke has the power to vote and dispose of the Calibre
Energy
common stock owned by Inversiones y Negocios Estrategicos SA.
|
|
(160)
Includes 750,000 options that are vested with an exercise price of
$0.05.
|
| (161) Marc Wilchesky exercises voting and dispositive power over all of the sahres beneficially owned by 2829916 Canada Inc. |
| (162) Bruce Bronfman exercises voting and dispositive power over all of the shares beneficially owned by Mida Investments. |
50
Kerogen
Resources, Inc.
Our
President and Chairman, Mr. Prentis B. Tomlinson, Jr., owns a 17.9% (on a fully
diluted basis) stake of Kerogen Resources, Inc., a privately held oil and gas
exploration company. We have entered into four agreements with Kerogen
Resources, Inc.
First,
we
are parties to a letter agreement with Kerogen Resources pursuant to which
we
are participating in the Reichmann Petroleum project. The
project is a joint venture with Kerogen Resources, Crosby Minerals and Reichmann
Petroleum Corporation to explore, acquire and develop properties located in
the
Barnett Shale in the Ft. Worth Basin of north Texas. Reichmann is the operator
of the properties. In October 2005 we acquired, through Kerogen Resources,
a
12.5% working interest in 6,190 net acres of leasehold interests in Parker,
Tarrant, Denton, and Johnson Counties, Texas. Subsequent to the initial
acquisition, we purchased a 25% working interest in 443 net acres of leasehold
interests from Reichmann Petroleum in Johnson County, Texas. Kerogen Resources
provides the technical guidance for the project and in exchange will receive
12.5% of our working interest in each well drilled. As of June
15,
2006, we have paid Kerogen a total $6,708,758, of which
$3,179,660 was for the 12.5% working interest in the initial 6,190
acres,
prepayment of drilling costs on 12 wells
and for
the 25% working interest in the leasehold interest in Johnson County, TX and
$3,529,098 was for operating costs (ie, drilling and completion costs) of the
JV
since the original payment. Kerogen
then paid such amounts to Reichmann Petroleum Corporation as reimbursement
of
leasehold costs, drilling and operating expenses.
Currently, our net acreage position subject to the Reichmann agreement is 773.94
net acres. As
of June
15, 2006, Calibre has participated in 22 gross wells pursuant to this agreement.
Four wells are currently producing, nine wells have been drilled, completed
and
fraced and are waiting to be hooked up to a pipeline, four wells have been
drilled, completed and are cleaning up after being frac prior to being hooked
up
to a gas gathering line, three wells have been drilled to total depth, completed
and are waiting to be fraced, and two wells are currently drilling.
Second,
we
have entered into a Participation Agreement with Kerogen Resources for the
exploration and development of prospects in the South Fort Worth Basin as
described above under “Our Business - Our Projects.” Pursuant to this agreement
we are obligated to pay Kerogen Resources $597,000 for its identification of
prospects; as of June 15, 2006, we have paid Kerogen Resources $500,000 of
such
amount. As of June 15, 2006, our net leasehold position pursuant to this
agreement is 3,161.93 acres. We have paid approximately $1,184,154 to Kerogen
for participation in these leases in the Ft. Worth Basin of Texas. All the
leasehold acreage is undeveloped. The price paid for leases represented market
prices for similar acreage in the area.
Third,
we
have entered into a Participation Agreement with Kerogen Resources for the
exploration and development of prospects in the Williston Basin as described
above under “Our Business - Our Projects.” Pursuant to this agreement we are
obligated to pay Kerogen Resources $638,600 for its identification of prospects,
as of June 15, 2006, we have paid Kerogen Resources $550,000 of such amount.
We
have not leased or developed any properties pursuant to this
agreement.
Fourth,
Calibre held a promissory note issued by Kerogen Resources. The principal owed
pursuant to the note was $300,000 bearing interest at the rate of 6.25% per
annum. The principal of this note and accrued interest thereon was due and
payable in a single installment on the maturity date. The maturity date was
the
earlier of September 30, 2006 or the date on which Kerogen Resources received
gross proceeds of at least $6,000,000 from a sale of equity, in one or more
transactions. Calibre acquired the note from Mr. Tomlinson in October 2005
in
exchange for a payment of $300,000. This note was entered into by Mr. Tomlinson,
a founder of Calibre Energy, in anticipation of the formation of Calibre Energy.
After the incorporation of Calibre Energy, the company entered into agreements
with Kerogen for the purpose of identification, exploration
and development of prospects in the Fort Worth Basin
and
Williston Basin. The Reichmann Petroleum Project and South Fort Worth Basin
project are projects identified by these agreements. On March 24, 2006, Kerogen
Resources repaid $314,623.29, the full amount
of
the promissory note and all interest due.
51
Standard
Drilling, Inc.
On
March 24,
2006, we loaned $350,000 to Standard Drilling, Inc. pursuant to a loan
bearing
interest at 4% per annum. On April 7, 2006 Standard Drilling, Inc. repaid
us
$350,544.54, the full amount of the loan with all interest due. Mr. Tomlinson,
our President, controls a limited liability company that, at the time of
the
loan, owned 53% of Standard Drilling, Inc and serves as its CEO. Further,
Standard Drilling’s principal officers also serve as officers for
us.
Several
of
our officers, including our President and CFO, are also employed as officers
and/or directors of Standard Drilling, Inc., a company engaged in the business
of drilling services. As a result, each of these officers devotes some
of their
business time to the management of Standard Drilling, Inc. The amount of
time
devoted to the management of our business and the management of Standard
Drilling’s business by each of these officers fluctuates from day to day and
week to week. An officer may devote his time exclusively to the management
of
our business or to Standard Drilling for a period of time. Each of the
officers
has significant discretion as to whether to devote time to management of
the
Company’s business or to management of Standard Drilling’s business.
Conflicts
of interest exist and may arise in the future as a result of our officers
and
directors who are also officers and/or directors of Standard Drilling.
These
officers and directors will owe fiduciary duties to each company and
may
encounter situations in which their fiduciary obligations to us and our
stockholders are in conflict with their fiduciary obligations to Standard
Drilling and its stockholders. Our Board’s conflicts committee, composed of Mr.
Drouet, will review and resolve all potential conflicts involving our
officers
and directors, including any agreements or transactions with Standard
Drilling.
The conflicts committee will also oversee the time devoted to the management
of
our business by those officers who are also employed by Standard
Drilling.
On
January
16, 2007 we entered into a Business Opportunity Agreement with Standard
Drilling, Inc. pursuant to which we agreed to not acquire, invest in
or operate
any oil field services business. We also agreed to advise Standard Drilling,
Inc., of any such opportunities presented to us. In exchange, Standard
Drilling,
Inc. agreed to not acquire, invest in or operate any exploration and
production
business other than that it currently holds and to advise us of any exploration
and production business that is presented to it.
We
share
facilities and some overhead costs with Standard Drilling in Washington
D.C. We
have entered into a service agreement pursuant to which Standard Drilling
will
pay us for office space and supplies, use of office equipment, secretarial
services and any other services we provide to them in sharing the Washington
D.C. office space. Pursuant to the services agreement, Standard Drilling
reimburses us for 50% of the costs of the health insurance provided to
officers
who are employed by both companies. The average monthly payment by Standard
Drilling to us under the services agreement is approximately $20,000. The
services agreement may be terminated by either party on 30 days notice.
The two
companies have separate offices and staff in Houston, Texas.
We
anticipate possibly engaging Standard Drilling to provide us with drilling
services. The terms of any such engagement will be reviewed and approved
or
rejected by the conflicts committee. We expect the terms of any such
agreement
to be no less favorable to us than those terms which may have been obtained
from
unrelated third parties. When appropriate, we will obtain competing bids
from
other drilling service companies, and may engage them to provide drilling
services.
Hawler
Energy, Ltd.
We
entered
into a Novation and Amendment Agreement among Hawler Energy, Ltd. ("Hawler
Energy"), a Cayman Islands company, A & T Petroleum Company, Ltd. ("A &
T"), a Cayman Islands company, and Hillwood Energy, Ltd. ("Hillwood"),
a Cayman
Islands company. Pursuant to the Novation Agreement we became parties to
the Exploration and Production Sharing Agreement ("the EPSA") dated March
29,
2006 between A&T, Hawler and the Oil and Gas Petroleum Establishment of the
Kurdistan Regional Government (the "OGE"). We have entered into a Joint
Operating Agreement with Hawler Energy, Ltd, a wholly owned subsidiary
of Prime
Natural Resources. Our Director W. Richard Anderson is the CEO of Prime
Natural
Resources. The Joint Operating Agreement with Hawler Energy, Ltd. makes
the
Company party to and gives the Company a 10% stake in an Exploration and
Production Sharing Agreement with the Kurdish Regional Government for the
exploration and development of the Bina Bawi prospects. Pursuant to this
agreement, we are obligated to pay Hawler Energy, Ltd.
$5,500,000; we have paid Hawler Energy, Inc. $2,000,000 of such amount
during the quarterly period ending September 30, 2006.
Miscellaneous Matters.
We
believe
all of the transactions with related parties have been on terms no less
favorable to us than those terms which may have been obtained from unrelated
third parties.
Mr. O. Oliver Pennington, our Chief Financial Officer, is our President’s
son-in-law.
52
Capitalization
of the Company
Common
Stock
We
are
authorized to issue 100,000,000 shares of common stock, par value $0.001 per
share. As of June 15, 2006, there are 56,600,806 shares of common stock issued
and outstanding. Each share of common stock is entitled to one vote per share
for the election of directors and on all other matters submitted to a vote
of
stockholders. There are no cumulative voting rights. Common stockholders do
not
have preemptive rights or other rights to subscribe for additional shares,
and
the common stock is not subject to conversion or redemption. In the event of
liquidation, the holders of common stock will share equally in any balance
of
corporate assets available for distribution to them. Subject to the rights
of
holders of the any other securities subsequently issued, holders of the common
stock are entitled to receive dividends when and as declared by our Board of
Directors out of funds legally available. We have not paid any dividends since
its inception and has no intention to pay any dividends in the foreseeable
future. Any future dividends would be subject to the discretion of the Board
of
Directors and would depend on, among other things, our future earnings, the
operating and financial condition, our capital requirements, and general
business conditions.
Preferred
Stock
We
are
authorized to issue 10,000,000 shares of preferred stock, par value $0.001
per
share. As of June 15, 2006, no shares of preferred stock are issued and
outstanding. Our Board of Directors can, without approval of our stockholders,
issue one or more series of preferred stock. If we offer preferred stock, our
Board of Directors will determine the number of shares and the rights,
preferences and limitations of each series. These rights, preferences and
limitations may include specific designations, number of shares, liquidation
value, dividend rights, liquidation and redemption rights, voting rights, other
rights, including conversion or exchange rights, if any, and any other specific
terms.
Warrants
and Options
2005
Stock Incentive Plan.
Pursuant
to our 2005 Stock Incentive Plan we may issue to our officers, directors,
employees and consultants incentive stock options, non-qualified stock options
and shares of restricted stock. The plan provides for us to issue up to
9,000,000 shares of its common stock pursuant to awards under the plan. As
of
June 15, 2006, we had outstanding options, granted pursuant to the plan, to
purchase 5,150,000 shares of common stock at an exercise price of $.05 per
share, 50,000 at shares of common stock at an exercise price of $.12 per share,
and 1,250,000 shares of common stock at an exercise price of $.24 per share.
All
of our outstanding options expire 10 years after the date of grant. The plan
is
designed to qualify under the Internal Revenue Code as an incentive stock option
plan.
Warrants.
As part
of our private offering in October 2005, we issued warrants to purchase
10,000,000 shares of our common stock at a price of $0.75 per share. The
warrants may be exercised through a cashless exercise in which the holder
surrenders warrants with sufficient value to pay the exercise price of the
warrants to be exercised. The warrants expire October 31, 2007. As of June
15,
2006, 400,000 warrants to purchase our common stock have been
exercised.
As
part of
our private offering in March and April 2006, we issued warrants to purchase
5,780,000 shares of our common stock at a price of $2.75 per share. Provided
that if the closing price of our common stock on any exchange on which the
common stock is traded or quoted equals or exceeds U.S.$4.00 for 20 consecutive
trading days and if either: (i) a registration statement registering the re-sale
of the shares issuable upon exercise of the warrants has been declared
effective, or (ii) Calibre has completed a “Canadian
Going Public Transaction” as referred to in the Warrant under the caption
“Canadian Reporting Issuer Status,” then the warrant term shall be automatically
reduced to 30 days from the date of initial issuance of a news release by
Calibre announcing the change to the warrant term. The
warrants expire April 18, 2008. Such
warrants for 1,750,000 shares of common stock were surrendered and cancelled
in
connection with the November 2006 private offering.
As
part of
our private offering in November 2006, we issued warrants to purchase 1,000,000
shares of common stock at a price of $1.50 per share. The warrants expire
November 6, 2008.
Placement
Agent Warrants.
In
connection with the October 2005 private offering of common stock we issued
to
the placement agents in that offering warrants to purchase an aggregate of
2,000,000 shares of common stock at an exercise price of $0.40. These warrants
are exercisable immediately and will expire October 31, 2007.
In
connection with the March and April 2006 private offering of common stock,
we
issued to the placement agents in that offering warrants to purchase an
aggregate of 577,500 shares of common stock which have the same terms as the
investor warrants except that the warrants have an exercise price of $2.00
per
share..
54
We
are
registering shares of our common stock on behalf of the selling stockholders.
As
used in this prospectus, “selling stockholders” includes donees, transferees,
pledgees and other successors in interest (other than purchasers pursuant to
this prospectus) selling shares received from a named selling stockholder after
the date of this prospectus. We will pay for all costs, expenses and fees in
connection with the registration of the shares. The selling stockholders will
pay for all selling discounts and commissions, if any. The selling stockholders
may offer and sell their shares from time to time in one or more of the
following types of transactions (including block transactions):
| · |
on
any national exchange on which the shares are listed or any automatic
quotation system through which the shares are
quoted,
|
| · |
in
the over-the-counter market,
|
| · |
in
privately negotiated transactions,
|
| · |
through
put and call transactions,
|
| · |
through
short sales made when the registration statement, of which this prospectus
is a part, is effective,
|
| · |
a
combination of such methods of
sale.
|
The
selling stockholders may sell their shares at prevailing market prices or at
privately negotiated prices. The selling stockholders may use brokers, dealers
or agents to sell their shares. The persons acting as agents may receive
compensation in the form of commissions, discounts or concessions. This
compensation may be paid by the selling stockholders or the purchasers of the
shares for whom such persons may act as agent, or to whom they may sell as
a
principal, or both.
The
selling stockholders may enter into hedging transactions with broker-dealers
or
other financial institutions. In connection with these transactions,
broker-dealers or other financial institutions may engage in short sales of
the
shares in the course of hedging positions they assume with selling stockholders.
The selling stockholders may also enter into options or other transactions
with
broker-dealers or other financial institutions which require the delivery to
these broker-dealers or other financial institutions of shares, which such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as amended or supplemented to reflect such transaction). The selling
stockholders may also engage in short sales of shares and, in those instances,
this prospectus may be delivered in connection with the short sales and the
shares offered under this prospectus may be used to cover the short
sales.
The
selling stockholders and any agents or broker-dealers that participate with
the
selling stockholders in the offer and sale of the shares may be deemed to be
“underwriters” within the meaning of Section 2(11) of the Securities Act of
1933. Any commissions they receive and any profit they realize on the resale
of
the shares by them may be deemed to be underwriting discounts and commissions
under the Securities Act of 1933. Neither we nor any selling stockholder can
presently estimate the amount of such compensation. Because a selling
stockholder may be deemed to be an “underwriter” within the meaning of the
Securities Act of 1933, the selling stockholders will be subject to the
prospectus delivery requirements of the Securities Act of 1933, which may
include delivery through the facilities of the applicable exchange or automated
quotation system pursuant to Rule 153 under the Securities Act of 1933. The
selling stockholders may agree to indemnify any agent, dealer or broker-dealer
that participates in transactions involving shares against certain liabilities,
including liabilities arising under the Securities Act of 1933.
55
The
selling stockholders and any other person participating in a distribution of
the
securities covered by this prospectus will be subject to applicable provisions
of the Securities Exchange Act of 1934 and the rules and regulations under
the
Securities Exchange Act of 1934, including Regulation M, which may limit the
timing of purchases and sales of any of the securities by the selling
stockholders and any other such person. Furthermore, under Regulation M, any
person engaged in the distribution of the securities may not simultaneously
engage in market-making activities with respect to the particular securities
being distributed for certain periods prior to the commencement of or during
such distribution. Regulation M’s prohibition on purchases may include purchases
to cover short positions by the selling stockholders, and a selling
stockholder’s failure to cover a short position at a lender’s request and
subsequent purchases by the lender in the open market of shares to cover such
short positions, may be deemed to constitute an inducement to buy shares, which
is prohibited by Regulation M. All of the above may affect the marketability
of
the securities and the ability of any person or entity to engage in
market-making activities with respect to the securities.
We
are not
aware of whether the selling stockholders have entered into any agreements,
understanding or arrangements with any broker-dealers regarding the sale of
their shares, nor as we aware that there is an underwriter or coordinating
broker acting in connection with the proposed sale of shares by the selling
stockholders.
Selling
stockholders also may resell all or a portion of the shares in open market
transactions in reliance upon Rule 144 under the Securities Act of 1933,
provided they meet the criteria and conform to the requirements of that
rule.
Following
notification by a selling stockholder that it has entered into any material
arrangement with a broker-dealer for the sale of shares through a block trade,
special offering, exchange distribution or secondary distribution or a purchase
by a broker or dealer, a supplement to this prospectus will be filed, if
required, pursuant to Rule 424(b) under the Securities Act,
disclosing:
| · |
the
name of each such selling stockholder and of the participating
broker-dealer(s);
|
| · |
the
number of shares involved;
|
| · |
the
initial price at which these shares were
sold;
|
| · |
the
commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
|
| · |
that
such broker-dealer(s) did not conduct any investigation to verify
the
information set out or incorporated by reference in this prospectus;
and
|
| · |
any
other facts material to the
transactions.
|
In
addition, following notification by a selling stockholder that a donee, pledgee,
transferee or other successor-in-interest of such selling stockholder intends
to
sell more than 500 shares, we will file a supplement to this
prospectus.
The
validity of the common stock offered by this prospectus was passed upon for
us
by Vinson & Elkins L.L.P., Houston, Texas.
56
The
consolidated financial statements as of December 31, 2005 and for the period
from Inception (August 17, 2005 to December 31, 2005, included in this
prospectus have been audited by Malone & Bailey, PC, independent registered
public accounting firm, as stated in their report dated April 28, 2006 appearing
herein in reliance of this firm as experts in accounting and
auditing.
Certain
estimates of our net oil and natural gas reserves and related information as
of
December 31, 2005 included in this prospectus have been derived from engineering
reports prepared by Ryder Scott Company, L.P. All such information has been
so
included on the authority of such firm as experts regarding the matters
contained in their reports.
This
prospectus is part of a registration statement we file with the Securities
and
Exchange Commission. This prospectus does not contain all of the information
contained in the registration statement and all of the exhibits and schedules
thereto. For further information about us, please see the complete registration
statement. Summaries of agreements or other documents in this prospectus are
not
necessarily complete. Please refer to the exhibits to the registration statement
for complete copies of such documents.
We
file
annual, quarterly and special reports, proxy statements and other information
with the Securities and Exchange Commission under the Securities Exchange Act
of
1934. You may read and copy the registration statement, including exhibits
and
schedules filed with it, at the SEC’s public reference facilities at 100 F
Street, N.E., Washington, D.C. 20549. You may obtain information on the
operation of the public reference room in Washington, D.C. by calling the
Securities and Exchange Commission at 1-800-SEC-0330.
We
file
information electronically with the Securities and Exchange Commission. Our
Securities and Exchange Commission filings also are available from the
Securities and Exchange Commission’s Internet site at http://www.sec.gov, which
contains reports, proxy and information statements and other information
regarding issuers that file electronically.
57
C
O N T E N T S
F-1
To
the
Board of Directors
Calibre
Energy, Inc.
Washington,
DC 20006
We
have
audited the accompanying consolidated balance sheet of Calibre Energy, Inc.
as
of December 31, 2005 and the related consolidated statements of operations,
stockholders’ equity, and cash flows for the period August 17, 2005 (inception)
to December 31, 2005. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated 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 an audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 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 financial statements referred to above present fairly, in all
material respects, the financial position of Calibre Energy, Inc. as of December
31, 2005 and the results of operations and cash flows for the period from August
17, 2005 (inception) to December 31, 2005, in conformity with accounting
principles generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that Calibre
Energy, Inc. will continue as a going concern. As discussed in Note 3 to the
financial statements, Calibre Energy, Inc. was formed on August 17, 2005 and
has
generated operating losses since inception, which raise substantial doubt about
its ability to continue as a going concern. Management’s plans in regard to
these matters are described in Note 3. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Malone
& Bailey, P.C.
Houston,
Texas
April 28,
2006
F-2
|
Calibre
Energy, Inc.
|
||||
|
December
31, 2005
|
||||
|
Assets
|
||||
|
Current
Assets
|
||||
|
Cash
|
$
|
2,105,749
|
||
|
Accounts
receivable
|
33,960
|
|||
|
Note
receivable - related party
|
300,000
|
|||
|
Other
current assets
|
104,100
|
|||
|
Total
current assets
|
2,543,809
|
|||
|
Noncurrent
Assets
|
||||
|
Oil
and gas properties, using full cost method
|
|
|||
|
Properties
subject to amortization
|
830,646
|
|||
|
Properties
not subject to amortization
|
4,478,235
|
|||
|
Furniture
and office equipment
|
121,778
|
|||
|
Less:
Accumulated depreciation, depletion, amortization and
impairment
|
(35,599
|
)
|
||
|
Net
property, furniture and office equipment
|
5,395,060
|
|||
|
Total
assets
|
$
|
7,938,869
|
||
|
Liabilities
and Shareholders’ Equity
|
||||
|
Current
Liabilities
|
||||
|
Accounts
payable - trade
|
946,852
|
|||
|
Accounts
payable - employees
|
98,630
|
|||
|
Accrued
expenses
|
20,482
|
|||
|
Total
liabilities
|
1,065,964
|
|||
|
Shareholders’
Equity
|
||||
|
Preferred
stock; $.001 par value; 10,000,000 authorized; none issued
|
-
|
|||
|
Common
stock; $.001 par value; 70,000,000 authorized; 47,000,000 issued
and
outstanding
|
47,000
|
|||
|
Additional
paid-in capital
|
8,727,556
|
|||
|
Accumulated
deficit
|
(1,901,651
|
)
|
||
|
Total
shareholders’ equity
|
6,872,905
|
|||
|
Total
liabilities and shareholders’ equity
|
$
|
7,938,869
|
||
|
See
accompanying notes to financial
statements.
|
||||
F-3
|
Calibre
Energy, Inc.
|
||||
|
For
the Period from Inception (August 17, 2005) to December 31,
2005
|
||||
|
Oil
and Gas Revenue
|
$
|
20,778
|
||
|
Operating
expenses
|
||||
|
Lease
operating expense
|
14,684
|
|||
|
Depletion
expense
|
35,599
|
|||
|
Compensation
expense(including salaries, benefits and a non-cash option
expense)
|
1,620,017
|
|||
|
General
and administrative (excluding compensation expense)
|
273,585
|
|||
|
Total
operating expense
|
1,943,885
|
|||
|
Loss
from operations
|
1,923,107
|
|||
|
Interest
income
|
21,502
|
|||
|
Interest
expense
|
(46
|
)
|
||
|
21,456
|
||||
|
Net
loss
|
$
|
1,901,651
|
||
|
Earnings
per share:
|
||||
|
Basic
and diluted
|
$
|
(0.05
|
)
|
|
|
See
accompanying notes to financial
statements.
|
||||
F-4
|
Calibre
Energy, Inc.
|
||||||||||||||||
|
For
the Period from Inception (August 17, 2005) to December 31,
2005
|
||||||||||||||||
|
Common
Stock
|
Additional
Paid-in
|
Accumulated
|
||||||||||||||
|
|
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
|||||||||||
|
Balance,
August 17, 2005 (inception)
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||||
|
Initial
capital from founding shareholders
|
27,000,000
|
27,000
|
27,000
|
|||||||||||||
|
Issuance
of common stock and warrants
|
20,000,000
|
20,000
|
7,223,056
|
7,243,056
|
||||||||||||
|
Stock
options granted to employees for services
|
1,504,500
|
1,504,500
|
||||||||||||||
|
Net
loss
|
(1,901,651
|
)
|
(1,901,651
|
)
|
||||||||||||
|
Balance,
December 31, 2005
|
47,000,000
|
$
|
47,000
|
$
|
8,727,556
|
$
|
(1,901,651
|
)
|
$
|
6,872,905
|
||||||
|
See
accompanying notes to financial
statements.
|
||||||||||||||||
F-5
|
Calibre
Energy, Inc.
|
||||
|
For
the Period from Inception (August 17, 2005) to December 31,
2005
|
||||
|
Cash
Flows from Operating Activities:
|
||||
|
Net
loss
|
$
|
(1,901,651
|
)
|
|
|
Adjustments
to reconcile net loss to net cash provided by operating
activities:
|
||||
|
Stock
options granted for services
|
1,504,500
|
|||
|
Depletion
expense
|
35,599
|
|||
|
Changes
in working capital components:
|
||||
|
(Increase)
in accounts receivable
|
(33,960
|
)
|
||
|
(Increase)
in other current assets
|
(104,100
|
)
|
||
|
Increase
in accounts payable
|
1,045,482
|
|||
|
Increase
in accrued expense
|
20,482
|
|||
|
Net
cash provided by operating activities
|
566,352
|
|||
|
Cash
Flows from Investing Activities:
|
||||
|
Additions
to oil and gas properties
|
(5,308,881
|
)
|
||
|
Additions
to furniture, office equipment and leasehold improvements
|
(121,778
|
)
|
||
|
Disbursements
on note receivable
|
(300,000
|
)
|
||
|
Net
cash (used in) investing activities
|
(5,730,659
|
)
|
||
|
Cash
Flows from Financing Activities:
|
||||
|
Proceeds
from sale of common stock
|
7,270,056
|
|||
|
Net
cash provided by financing activities
|
7,270,056
|
|||
|
Net
increase in cash
|
$
|
2,105,749
|
||
|
Cash:
|
||||
|
Beginning
of period
|
—
|
|||
|
End
of period
|
$
|
2,105,749
|
||
|
Supplemental
information:
|
||||
|
Income
taxes paid
|
—
|
|||
|
Interest
paid
|
46
|
|||
|
See
accompanying notes to financial
statements.
|
||||
F-6
CALIBRE ENERGY, INC.
Calibre
Energy, Inc. (the “Company” or “Calibre”) is an exploration and production
company focused on the acquisition, exploitation and development of high
quality, long-lived producing and non-producing fractured gas and oil shale
properties in selected producing basins in North America. Headquartered in
Washington, DC and Houston, Texas, Calibre is a Delaware corporation that was
formed on August 17, 2005.
Calibre
completed a reverse merger into a public company, Hardwood Doors and Milling
Specialties, Inc. (“Hardwood”), on January 27, 2006, in which Calibre obtained a
controlling interest. See Note 11 for details.
Calibre’s
goal is to expand and develop our exploration and production business and its
reserves by initially emphasizing the identification and development of shale
gas opportunities in the Barnett Shale and the Fayetteville Shale. Calibre
has
identified that both the Mississippian developments of the Barnett Shale in
the
Ft. Worth Basin and the Fayetteville Shale development in the Arkoma Basin
provide the greatest near term economic value to it. Calibre is currently
participating in three projects with Kerogen Resources, Inc., a small, privately
held, exploration and production company, located in Houston, Texas, the
Reichmann Petroleum project, South Ft. Worth Basin project and Williston Basin
project. As of June 15, 2006,, Calibre held 774 net acres in the Reichmann
Petroleum project and 3,161.93 net acres in the South Ft. Worth JV and has
participated in 22 gross wells. Four wells are currently producing, nine wells
have been drilled, completed and fraced and are waiting to be hooked up to
a
pipeline, four wells have been drilled, completed and are cleaning up after
being frac prior to being hooked up to a gas gathering line, three wells have
been drilled to total depth, completed and are waiting to be fraced, and two
wells are currently drilling. Calibre has acquired 5,318 gross leasehold acres
and 3,417 net acres in the Barnett Shale outside of the areas covered by the
Reichmann Petroleum project, South Ft. Worth Basin project and Williston Basin
project. Calibre anticipates that it will commence development activities on
these leases in the third quarter of 2006. Additionally, as of June 15, 2006,
we
have acquired 2,636 gross leasehold acres and 1,771 net leasehold acres in
the
Fayetteville Shale development in the Arkoma Basin in Arkansas.
Calibre
anticipates applying a business model to achieve substantial annual growth
in
production and reserves with a relatively low risk approach. These plans include
deploying known techniques for use in identifying, predicting, and optimizing
future production volumes and rates. Using multi-discipline teams with core
competencies of petrophysics, reservoir and production engineering, geology
and
geophysics, the Calibre’s emphasis will be on the practical integrated
application of these technologies to identify previously “hidden” potential.
This model mitigates conventional exploration risk because Calibre will focus
on: a) shales that are laterally extensive (pervasive); b) basins where the
target zones have been previously penetrated and found to be productive; c)
shales that have been successfully fraced (contained); d) cuttings utilized
to
validate source rock potential, porosity, and permeability; and e) projects
that
will be financially leveraged.
F-7
Notes
to Financial Statements
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Calibre’s
financials are based on a number of significant estimates, including oil and
gas
reserve quantities which are the bases for the calculation of depreciation,
depletion and impairment of oil and gas properties, and timing and costs
associated with its retirement obligations.
Cash
and Cash Equivalents
Cash
and
cash equivalents include cash in banks and certificates of deposit which mature
within three months of the date of purchase.
Concentration
of Credit Risk
Financial
instruments that potentially subject Calibre to concentration of credit risk
consist of cash. At December 31, 2005, Calibre had $1,905,749 in cash in excess
of federally insured limits. Calibre maintains cash accounts only at large
high
quality financial institutions and Calibre believes the credit risk associated
with cash is remote.
Oil
and Gas Properties
Calibre
follows the full cost method of accounting for oil and gas properties.
Accordingly, all costs associated with acquisition, exploration, and development
of oil and gas reserves, including directly related overhead costs and related
asset retirement costs, are capitalized.
All
capitalized costs of oil and gas properties, including the estimated future
costs to develop proved reserves, are amortized on the unit-of-production
method
using estimates of proved reserves. Investments in unproved properties and
major
development projects in progress are not amortized until proved reserves
associated with the projects can be determined and are periodically assessed
for
impairment. If the results of an assessment indicate that the properties
are
impaired, such impairment is added to the costs being amortized and is subject
to the ceiling test.
Sales
of
proved and unproved properties are accounted for as adjustments of capitalized
costs with no gain or loss recognized, unless such adjustments would
significantly alter the relationship between capitalized costs and proved
reserves of oil and gas, in which case the gain or loss is recognized in
income.
F-8
Notes
to
Financial Statements
Oil
and Gas Properties
Not Subject to Amortization
Calibre
is
currently participating in oil and gas exploration and development activities.
At December 31, 2005, a determination cannot be made about the extent of oil
reserves that should be classified as proved reserves. Consequently, all the
property, development and exploratory costs have been excluded in computing
amortization. Calibre will begin to amortize these costs when these projects
are
evaluated, which is currently estimated to be 2006.
Furniture
and Office Equipment
Furniture
and office equipment is stated at cost. Depreciation is computed on a
straight-line basis over the estimated useful lives of 5 years. During the
period ended December 31, 2005, there was no depreciation expense as the assets
were not in place and utilized until after the period end.
Employee
Stock Plan
In
December 2004, the FASB issued SFAS No.123R, “Accounting for Stock-Based
Compensation” (“SFAS No. 123R”). SFAS No.123R establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services. This Statement focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions. SFAS No.123R requires that the fair value of such equity
instruments be recognized as expense in the historical financial statements
as
services are performed. Prior to SFAS No.123R, only certain pro forma
disclosures of fair value were required. SFAS No.123R shall be effective for
small business issuers as of the beginning of the first interim or annual
reporting period that begins after December 15, 2005. Calibre will adopt SFAS
No. 123R as of January 1, 2006.
Calibre
has a stock-based compensation plan, which is described more fully in Note
6. As
permitted under generally accepted accounting principles, Calibre accounts
for
the plan under the recognition and measurement principles of APB Opinion No.
25,
Accounting for Stock Issued to Employees, and related interpretations.
Accordingly, stock-based employee compensation cost has been recognized, as
all
options granted under the plan had an exercise price less than the market value
of the underlying common stock on the date of grant, see note 6 for more
information. There would be minimal effect on the net loss had compensation
cost
for the stock-based compensation plan been determined based on the grant date
fair values of awards (the method described in FASB Statement No. 123,
Accounting for Stock-Based Compensation).
Income
Taxes
Provisions
for income taxes are based on taxes payable or refundable for the current year
and deferred taxes on temporary differences between the amount of taxable income
and pretax financial income and between the tax bases of assets and liabilities
and their reported amounts in the financial statements. Deferred tax assets
and
liabilities are included in the financial statements at currently enacted income
tax rates applicable to the period in which the deferred tax assets and
liabilities are expected to be realized or settled as prescribed in SFAS
Statement No. 109, Accounting for Income Taxes. As changes in tax laws or rates
are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes. A valuation allowance is established when necessary
to reduce the deferred tax asset to the amount expected to be realized.
F-9
Notes
to Financial Statements
Revenue
and Cost Recognition
Calibre
uses the sales method of accounting for natural gas and oil revenues. Under
this
method, revenues are recognized based on the actual volumes of gas and oil
sold
to purchasers. The volume sold may differ from the volumes to which Calibre
is
entitled based on our interest in the properties. Costs associated with
production are expensed in the period incurred.
Note
3. Going
Concern
As
shown
in the accompanying financial statements, Calibre has incurred operating losses
since inception and expects to continue to incur losses through 2006. As of
December 31, 2005, Calibre has limited financial resources until such time
that
Calibre is able to generate positive cash flow from operations. These factors
raise substantial doubt about our ability to continue as a going concern.
Calibre’s ability to achieve and maintain profitability and positive cash flow
is dependent upon Calibre’s ability to locate profitable properties, generate
revenue from their planned business operations, and control exploration cost.
Management plans to fund its future operation by obtaining additional financing
and commencing commercial production. However, there is no assurance that we
will be able to obtain additional financing from investors or private lenders
and, if available, such financing may not be on commercial terms acceptable
to
Calibre or its shareholders.
Note
4. Income
Taxes
Net
deferred tax assets consist of the following components as of December 31,
2005:
|
Net
operating loss
|
665,578
|
|||
|
Less
valuation allowance
|
(665,578
|
)
|
||
|
Total
|
$
|
-
-
|
The
components giving rise to the net deferred tax assets described above have
been
included in the accompanying balance sheet as noncurrent assets. The deferred
tax assets are net of a full valuation allowance of $665,578 based on the amount
that management believes will ultimately be realized. Realization of deferred
tax asset is dependent upon sufficient future taxable income during the period
that deductible temporary differences and carryforwards are expected to be
available to reduce taxable income. Loss carryforwards for tax purposes will
begin to expire in 2025.
The
income
tax provision differs from the amount of income determined by applying the
U.S.
Federal income tax rate to pretax income for the year ended December 31, 2005
primarily due to the valuation allowance.
Note
5. Oil
and Gas Properties Not Subject to Amortization
Calibre
is
currently participating in oil and gas exploration and development activities
on
onshore properties in the Fort Worth Basin, Williston Basin and Arkhoma Basin.
At December 31, 2005, these activities are in the early stages of development
and a
F-10
Notes
to Financial Statements
determination
cannot be made about the extent of oil and gas reserves that should be
classified as proved reserves. Accordingly, the capital costs have been excluded
from the computation of amortization of the full cost pool. Calibre will begin
to amortize these costs as the projects are completed and reserve estimates
are
available. We estimate that many of the projects we are currently participating
in will be evaluated and subject to amortization by the 2006 year
end.
Costs
excluded from amortization consist of the following at December 31,
2005:
|
Year
Incurred
|
Acquisition
Costs
|
Exploration
Costs
|
Development
Costs
|
Capitalized
Interest
|
Total
|
|
2005
|
$1,042,418
|
$1,083,130
|
$2,352,687
|
-
|
4,478,235
|
Note
6. Shareholders’
Equity
Preferred
Stock
Calibre
is
authorized to issue up to 10 million shares of $.001 par value preferred stock,
the rights and preferences of which are to be determined by the Board of
Directors at or prior to the time of issuance. As of December 31, 2005 none
of
the preferred stock is outstanding.
Common
Stock
Calibre
is
authorized to issue 70,000,000 shares of common stock, par value of $.001 per
share. The founding shareholders were granted and issued 27,000,000 shares
of
common stock at inception. In October 2005, Calibre completed a private offering
of 20,000,000 shares of common stock at a price of $.40 per share realizing
net
proceeds after offering costs of $7.2 million. In conjunction with the common
shares issued, Calibre issued warrants to purchase 10,000,000 shares of common
stock at an exercise price of $.75 per share. The warrants expire in October
2007. These warrants are valued at $0.15 per share or $1,500,000. Calibre paid
fees and expenses related to this offering of $756,944. Calibre also granted
2,000,000 warrants with an exercise price of $0.40 per share. The Warrants
expire in October 2007. These warrants were also valued at $0.15 or
$300,000.
Note
7. Stock
Option Plan
2005
Stock Incentive Plan.
Calibre
adopted the 2005 Stock Incentive Plan (the “Plan”) in October 2005. Under the
Plan options may be granted to key employees and other persons who contribute
to
the success of Calibre. Calibre has reserved 9,000,000 shares of common stock
for the plan. During the period ended December 31, 2005, we granted options
pursuant to the plan, to purchase 5,150,000 shares of common stock at an
exercise price of $.05 per share, 50,000 options to purchase shares of common
stock at an exercise price of $.12 per share, and 1,250,000 options to purchase
shares of common stock at an exercise price of $.24 per share. 5,800,000 options
are fully vested and 650,000 options vest equally over a four year period.
All
of our outstanding options expire 10 years after the date of grant. The plan
is
designed to qualify under the Internal Revenue Code as an incentive stock option
plan. Compensation expense recorded through December 31, 2005 for the options
granted is $1,504,500.
F-11
|
December
31, 2005
|
||
|
Net
loss, as reported
|
($1,901,651)
|
|
|
Add:
Stock based intrinsic value included in report loss
|
($1,504,500)
|
|
|
Less:
Total stock-based employee compensation expense determined under
the fair
value based method for all awards
|
($1,877,465)
|
|
|
Pro-forma
net loss
|
($2,274,616)
|
|
|
Basic
and diluted loss per share:
|
||
|
As
reported
|
($0.05)
|
|
|
Pro
forma
|
($0.06)
|
The
fair
value of each option granted is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions: dividend yield $0, expected volatility of 57.99%, risk-free
interest rate of 5.0%, and expected lives of 10 years.
Note
8. Related
Party Transactions
Prentis
B.
Tomlinson, Jr., served as a Director and Chairman of the Board of Directors
from
its formation in July 2005 until April 21, 2006. He owns a 17.9% interest in
Kerogen Resources, Inc. (“KRI”.) Calibre has entered into four agreements with
Kerogen Resources, Inc.
First,
Calibre is a party to a letter agreement with Kerogen Resources pursuant to
which Calibre is participating in the Reichmann Petroleum project. The
project is a joint venture with Kerogen Resources, Crosby Minerals and Reichmann
Petroleum Corporation to explore, acquire and develop properties located in
the
Barnett Shale in the Ft. Worth Basin of north Texas. Reichmann is the operator
of the properties. In October 2005 Calibre acquired, through Kerogen Resources,
a 12.5% working interest in 6,190 net acres of leasehold interests in Parker,
Tarrant, Denton, and Johnson Counties, Texas. Subsequent to the initial
acquisition, Calibre purchased a 25% working interest in 443 net acres of
leasehold interests from Reichmann Petroleum in Johnson County, Texas. Kerogen
Resources provides the technical guidance for the project and in exchange will
receive 12.5% of our working interest in each well drilled. As of March
31,
2005, Calibre has paid Kerogen a total $4,835,061, of which
$3,179,660 was for the 12.5% working interest in the initial 6,190
acres,
prepayment of drilling costs on 12 wells and
for
the purchase of the 25% working interest in the leasehold interest in Johnson
County and $1,655,401 was for operating costs (ie, drilling and completion
costs) of the joint venture since the original payment. Kerogen
then paid such amounts to Reichmann Petroleum Corporation as reimbursement
of
leasehold costs, drilling and operating expenses.
Currently, our net acreage position subject to the Reichmann agreement is 773.94
net acres. As
of
April 30, 2006, Calibre has participated in 22 gross wells. Four wells that
are
currently producing, nine wells have been drilled, completed and fraced and
are
waiting to be hooked up to a pipeline, four wells have been drilled, completed
and are cleaning up after being frac prior to being hooked up to a gas gathering
line, three wells have been drilled to total depth, completed and are waiting
to
be fraced, and two wells are currently drilling.
Second,
Calibre has entered into a Participation Agreement with Kerogen Resources for
the exploration and development of prospects in the South Fort Worth Basin.
Pursuant to this agreement Calibre is obligated to pay Kerogen Resources
$597,000 for its
F-12
Notes
to Financial Statements
identification
of prospects; Calibre has paid Kerogen Resources $500,000 of such amount. As
of
April 30, 2006 Calibre
has leased approximately 2,399 net leasehold acres under 8,885 gross leasehold
acres pursuant to this agreement. Calibre
has paid $666,637 to Kerogen for participation in these leases in the Ft. Worth
Basin of Texas. All the leasehold acreage is currently undeveloped. Management
believes the price paid for leases represented market prices for similar acreage
in the area.
Third,
Calibre has entered into a Participation Agreement with Kerogen Resources for
the exploration and development of prospects in the Williston Basin. Pursuant
to
this agreement Calibre is obligated to pay Kerogen Resources $638,600 for its
identification of prospects; Calibre has paid Kerogen Resources $550,000 of
such
amount. As of March 31, 2006, Calibre has not leased or developed any properties
pursuant to this agreement.
Fourth,
Calibre held a promissory note issued by Kerogen Resources. The principal owed
pursuant to the note was $300,000 bearing interest at the rate of 6.25% per
annum. The principal of this note and accrued interest thereon was due and
payable in a single installment on the maturity date. The maturity date was
the
earlier of September 30, 2006 or the date on which Kerogen Resources received
gross proceeds of at least $6,000,000 from a sale of equity, in one or more
transactions. Calibre acquired the note from Mr. Tomlinson in October 2005
in
exchange for a payment of $300,000. This note was entered into by Mr. Tomlinson,
a founder of Calibre Energy, in anticipation of the formation of Calibre Energy.
After the incorporation of Calibre Energy, the company entered into agreements
with Kerogen for the purpose of identification, exploration
and development of prospects in the Fort Worth Basin
and
Williston Basin. The Reichmann Petroleum Project and South Fort Worth Basin
project are projects identified by these agreements. On March 24, 2006, Kerogen
Resources repaid $314,623.29, the full amount of the promissory note and all
interest due.
On
March
24, 2006, we loaned $350,000 to Standard Drilling, Inc. pursuant to a loan
bearing interest at 4% per annum. On April 7, 2006 Standard Drilling, Inc.
repaid us $350,544.54, the full amount of the loan with all interest due.
Mr. Tomlinson, our President, controls a limited liability company that, at
the
time of the loan, owned 53% of Standard Drilling, Inc. Further, Standard
Drilling’s principal officers also serve as officers of Calibre.
Several
of
our officers, including our President and CFO, are also employed as officers
and/or directors of Standard Drilling, Inc., a company engaged in the business
of drilling services.
F-13
Notes
to Financial Statements
Calibre
has entered into a three year operating lease agreement for office space in
Washington, DC. The lease commenced on November 1, 2005 and will expire on
October 31, 2008.
At
December 31, 2005, future minimum lease payments under the operating lease
are
as follows:
|
2006
|
$
|
100,927
|
||
|
2007
|
103,450
|
|||
|
2008
|
79,033
|
|||
|
2009
|
-
|
|||
|
2010
|
-
|
|||
|
Thereafter
|
-
|
|||
|
Total
|
$
|
283,410
|
Total
rent
expense was $32,557 for the period ended December 31, 2005. There were $17,700
of leasehold incentives which will be amortized over the life of the lease.
As
of March 31, 2005, we have drilling commitments of $3,183,898 in 2006 for
drilling and completion of wells in progress.
NOTE
10
- Asset Retirement Obligations
In
accordance with SFAS 143, “Accounting for Asset Retirement Obligations” Calibre
records the fair value of a liability for asset retirement obligations (“ARO”)
in the period in which it is incurred and a corresponding increase in the
carrying amount of the related long-lived asset. The present value of the
estimated asset retirement cost is capitalized as part of the carrying amount
of
the long-lived asset and is depreciated over the useful life of the asset.
Calibre accrues an abandonment liability associated with
F-14
Notes
to Financial Statements
its
oil
and gas wells when those assets are placed in service. The ARO is recorded
at
its estimated fair value and accretion is recognized over time as the discounted
liability is accreted to its expected settlement value. Fair value is determined
by using the expected future cash outflows discounted at Calibre’s risk-free
interest rate. No market risk premium has been included in Calibre’s calculation
of the ARO balance. Calibre’s net ARO liability at December 31, 2005 is expected
to approximate the salvage value of the properties..
NOTE
11
- Subsequent Events
Reverse
Merger
On
January
27, 2006, pursuant to an Amended and Restated Agreement and Plan of
Reorganization dated as of January 17, 2006 by and among Hardwood Doors and
Milling Specialties, Inc., a Nevada corporation (”Hardwood”),
Calibre Acquisition Co., a Delaware corporation (“Merger
Sub”),
and
Calibre Energy, Inc., a Delaware corporation (“Calibre
Energy Delaware”),
( the
“Merger Agreement”), Merger Sub was merged with and into Calibre Energy
Delaware, and Calibre Energy Delaware became a wholly-owned subsidiary of
Hardwood (the “Merger”).
As a
result of the Merger, Hardwood, which previously had no material operations,
acquired the business of Calibre Energy Delaware. For accounting purposes,
this
reorganization was treated as a reverse merger, with Calibre Energy, Inc.
being
the accounting acquirer and the go-forward financial statements reflect
Calibre’s history from its inception on August 17, 2005.
Each
outstanding share of common stock of Calibre Energy Delaware was converted
into
one share of common stock of Hardwood. All outstanding options and warrants
to
purchase common stock of Calibre Energy Delaware were assumed by Calibre
and
converted into options and warrants to purchase an equal number of shares
of
common stock of Hardwood. The Merger resulted in a change of control of
Hardwood, with the former security holders of Calibre Energy Delaware owning
approximately 93.0% of Hardwood’s outstanding common stock, or approximately
93.7% assuming the exercise of all outstanding options and warrants, following
the closing of the Merger.
In
the
Merger, Hardwood issued 47,000,000 shares of its common stock in exchange
for
47,000,000 shares of common stock of Calibre Energy Delaware and reserved
for
issuance (1) 10,000,000 shares of common stock pursuant to outstanding warrants
to purchase common stock of Calibre Energy Delaware that were assumed by
Hardwood, and (2) 6,425,000 shares of common stock pursuant to outstanding
options to purchase common stock of Calibre Energy Delaware pursuant to the
Calibre Energy, Inc. 2005 Stock Incentive Plan that were assumed by Hardwood.
In
connection with the Merger, Calibre paid Hardwood $100,000 as a deposit pursuant
to the Merger Agreement. A condition to the Merger was an agreement by the
then
principal stockholder of Hardwood to cancel, immediately prior to the Merger,
19,575,000 outstanding shares of common stock of Hardwood that had been issued
to the principal shareholder. In consideration of such cancellation, Hardwood
paid the principal shareholder $100,000, and Calibre
recognized recapitalization expense of $100,000. The then principal
shareholder of Hardwood also assumed the net liabilities of Hardwood. As
a
result of the Merger, Hardwood has 50,525,000 shares of common stock issued
and
outstanding and an additional 18,425,000 shares of common stock reserved
for
issuance as described above.
In
connection with the consummation of the Merger, we changed our name to Calibre
Energy, Inc.
Private
Placement
On
April
18, 2006 Calibre completed a private placement to institutional and other
accredited investors in which it sold 5,780,000
units. Each unit, composed of one share of common stock and a warrant to
purchase a share of common stock, was sold at a price of $2.00. Aggregate
gross proceeds to Calibre were $11,560,000.
Offering costs were $888,800 and will be reflected as a reduction in the
proceeds.
F-15
Notes
to Financial Statements
Each
warrant issued entitles the holder to acquire one additional share of Calibre
common stock at an exercise price of U.S. $2.75 per share at any time on or
before two years following the date of issuance. Provided that if the closing
price of our common stock on any exchange on which the common stock is traded
or
quoted equals or exceeds U.S.$4.00 for 20 consecutive trading days and if
either: (i) a registration statement registering the re-sale of the shares
issuable upon exercise of the warrants has been declared effective, or (ii)
Calibre has completed a “Canadian Going Public Transaction” as referred to in
the Warrant under the caption “Canadian Reporting Issuer Status,” then the
warrant term shall be automatically reduced to 30 days from the date of initial
issuance of a news release by Calibre announcing the change to the warrant
term.
In
connection with sales outside the United States, Calibre Energy paid finders
fees totaling $888,800 and issued to the finders warrants to acquire a total
of
577,500 shares on the same terms as those warrants issued to the investors
except that the exercise price for the finders’ warrants is $2.00 per
share.
F-16
(UNAUDITED)
The
standardized measure of discounted future net cash flows is computed by applying
year-end prices of oil and gas to the estimated future production of proved
oil
and gas reserves, less estimated future expenditures (based on year-end costs)
to be incurred in developing and producing the proved reserves, less estimated
future income tax expenses (based on year-end statutory tax rates) to be
incurred on pre-tax net cash flows less tax basis of the properties and
available credits, and assuming continuation of existing economic conditions.
The estimated future net cash flows are then discounted using a rate of 10
percent per year to reflect the estimated timing of the future cash
flows.
Proved
Developed and Undeveloped Oil and Gas Reserves, at year end (net):
|
From
Inception (August 17, 2005) to December 31, 2005
|
||||
|
(MMcf)
|
||||
|
Balance,
August 17, 2005
|
-
|
|||
|
Extensions,
discoveries and improved production
|
69.000
|
|||
|
Production
|
(3.000
|
)
|
||
|
Balance,
December 31, 2005
|
66.000
|
|||
|
Proved
developed reserves
|
||||
|
At
August 17, 2005
|
-
|
|||
|
At
December 31, 2005
|
66.000
|
Standardized
Measure of Discounted Future Net Cash Flows:
|
December
31, 2005
|
||||
|
Future
cash inflows
|
$
|
462,794
|
||
|
Future
production costs
|
($154,904
|
)
|
||
|
Future
development costs and abandonment
|
(10,938
|
)
|
||
|
Future
net cash flows before income taxes
|
296,952
|
|||
|
Future
income taxes
|
(103,933
|
)
|
||
|
Future
net cash flows
|
193,019
|
|||
|
10%
annual discount for estimated
timing
of cash flows
|
(60,500
|
)
|
||
|
Standardized
Measure of Discounted Future Net Cash Flows
|
$
|
132,519
|
||
F-17
Changes
in
Standardized Measure of Discounted Future Net Cash Flows:
|
|
From
Inception (August 7, 2005) to December 31, 2005
|
|||
|
Beginning
of the year
|
-
|
|||
|
Extensions,
discoveries and improved production
|
$
|
138,613
|
||
|
Sales
of oil and gas produced, net of production costs
|
(6,094
|
)
|
||
|
End
of the Year
|
$
|
132,519
|
F-18
|
Calibre
Energy, Inc.
|
|||||||
|
(unaudited)
|
|||||||
|
March
31, 2006
|
|||||||
|
|
|
|
|||||
|
|
March
31,
|
December
31,
|
|||||
|
|
2006
|
2005
|
|||||
|
Assets
|
|
|
|||||
|
Current
Assets
|
|
|
|||||
|
Cash
|
4,308,654
|
2,105,749
|
|||||
|
Accounts
receivable
|
|
|
|||||
|
Oil
and gas sales
|
39,472
|
33,960
|
|||||
|
Note
receivable - related party
|
350,000
|
300,000
|
|||||
|
Prepaid
expenses and other
|
6,245
|
104,100
|
|||||
|
|
|
|
|||||
|
Total
current assets
|
4,704,371
|
2,543,809
|
|||||
|
|
|
|
|||||
|
Noncurrent
Assets
|
|
|
|||||
|
Oil
and gas properties, using full cost method
|
8,568,016
|
5,308,881
|
|||||
|
Furniture
and office equipment
|
282,386
|
121,778
|
|||||
|
Less:
Accumulated depreciation, depletion, amortization and
impairment
|
(67,631
|
)
|
(35,599
|
)
|
|||
|
Net
property, furniture and office equipment
|
8,782,771
|
5,395,060
|
|||||
|
|
|
|
|||||
|
Other
assets
|
11,100
|
-
|
|||||
|
|
|
|
|||||
|
Total
assets
|
13,498,242
|
7,938,869
|
|||||
|
|
|
|
|||||
|
Liabilities
and Shareholders’ Equity
|
|
|
|||||
|
Current
Liabilities
|
|
|
|||||
|
Accounts
payable - trade
|
1,443,367
|
946,852
|
|||||
|
Accounts
payable - employees
|
-
|
98,630
|
|||||
|
Accrued
expenses
|
30,735
|
20,482
|
|||||
|
Total
liabilities
|
1,474,102
|
1,065,964
|
|||||
|
|
|
|
|||||
|
Shareholders’
Equity
|
|
|
|||||
|
Preferred
stock; $.001 par value; 10,000,000 authorized; none issued
|
-
|
-
|
|||||
|
Common
stock; $.001 par value; 100,000,000 authorized; 53,980,806 and 47,000,000
issued and outstanding at March 31, 2006 and December 31, 2005,
respectively
|
53,981
|
47,000
|
|||||
|
Additional
paid-in capital
|
14,545,422
|
8,727,556
|
|||||
|
Accumulated
deficit
|
(2,575,263
|
)
|
(1,901,651
|
)
|
|||
|
Total
shareholders’ equity
|
12,024,140
|
6,872,905
|
|||||
|
|
|
|
|||||
|
Total
liabilities and shareholders’ equity
|
13,498,242
|
7,938,869
|
|||||
F-19
|
Calibre
Energy, Inc.
|
||||
|
For
the Three Months Ended March 31, 2006
|
||||
|
(unaudited)
|
||||
|
|
|
|
|
|
|
Oil
and Gas Revenue
|
|
|
$39,342
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
Lease
operating expense
|
|
|
9,296
|
|
|
Depletion
expense
|
|
|
14,332
|
|
|
Compensation
expense
|
|
|
155,006
|
|
|
Professional
fees
|
|
|
246,568
|
|
|
General
and administrative (excluding compensation expense)
|
|
|
311,866
|
|
|
Total
operating expense
|
|
|
737,068
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(697,726)
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
24,114
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
($673,612)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
Basic
and diluted
|
|
|
($0.01)
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
49,755,558
|
|
F-20
|
Calibre
Energy, Inc.
|
|||||||||
|
For
the Three Months Ended March 31, 2006
|
|||||||||
|
(unaudited)
|
|||||||||
|
|
|
|
|
|
|
|
|
||
|
|
Common
Stock
|
|
Additional
|
|
|
|
|
||
|
|
|
|
|
|
Paid-in
|
|
Accumulated
|
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2005
|
47,000,000
|
|
$47,000
|
|
$8,727,556
|
|
($1,901,651)
|
|
$6,872,905
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse
merger
|
3,525,000
|
|
3,525
|
|
(3,525)
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for cash, net of offering costs
|
3,160,000
|
|
3,160
|
|
5,811,434
|
|
|
|
5,814,594
|
|
|
|
|
|
|
|
|
|
|
|
|
Cashless
exercise of warrants
|
295,806
|
|
296
|
|
(296)
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
expense
|
|
|
|
|
10,253
|
|
|
|
10,253
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
(673,612)
|
|
(673,612)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2006
|
53,980,806
|
|
$53,981
|
|
$14,545,422
|
|
($2,575,263)
|
|
$12,024,140
|
F-21
|
Calibre
Energy, Inc.
|
|||
|
For
the Three Months Ended March 31, 2006
|
|||
|
(Unaudited)
|
|||
|
|
|
|
|
|
Cash
Flows from Operating Activities
|
|
|
|
|
Net
loss
|
|
($673,612)
|
|
|
Adjustments
to reconcile net loss to net cash provided by operating
activities:
|
|
|
|
|
Noncash recapitalization
expense
|
|
100,000
|
|
|
Accretion
of stock option expense
|
|
10,253
|
|
|
Depreciation
and depletion expense
|
|
32,032
|
|
|
Changes
in working capital components:
|
|
|
|
|
(Increase)
in accounts receivable
|
|
(5,512)
|
|
|
(Increase)
in other current assets
|
|
(2,145)
|
|
|
(Increase)
in other assets
|
|
(11,100)
|
|
|
Increase
in accounts payable
|
|
397,885
|
|
|
Increase
in accrued expense
|
|
10,253
|
|
|
Net
cash (used in) operating activities
|
|
(141,946)
|
|
|
|
|
|
|
|
Cash
Flows from Investing Activities
|
|
|
|
|
Additions
to oil and gas properties
|
|
(3,259,135)
|
|
|
Additions
to furniture, office equipment and leasehold improvements
|
|
(160,608)
|
|
|
Receipts
on notes receivable
|
|
300,000
|
|
|
Disbursements
on note receivable
|
|
(350,000)
|
|
|
Net
cash (used in) investing activities
|
|
(3,469,743)
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities
|
|
|
|
|
Proceeds
from sale of common stock
|
|
5,814,594
|
|
|
Net
cash provided by financing activities
|
|
5,814,594
|
|
|
|
|
|
|
|
Net
increase in cash
|
|
2,202,905
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
Beginning
of period
|
|
2,105,749
|
|
|
End
of period
|
|
$4,308,654
|
|
|
|
|
|
|
|
Supplemental
cash flow information:
|
|
|
|
|
Interest
paid
|
|
-
|
|
F-22
Notes
to Financial Statements
CALIBRE
ENERGY, INC.
(Unaudited)
Note
1. -
Basis of
Presentation
The
accompanying unaudited interim financial statements of Calibre Energy, Inc.
have
been prepared in accordance with accounting principles generally accepted in
the
United States of America and the rules of the Securities and Exchange
Commission, and should be read in conjunction with the audited financial
statements and notes thereto contained in the Company’s annual report filed with
the SEC on Form 10K-SBA. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation
of
financial position and the results of operations for the interim periods
presented have been reflected herein. The results of operations for interim
periods are not necessarily indicative of the results to be expected for the
full year. Notes to the financial statements which would substantially duplicate
the disclosure contained in the audited financial statements for the most recent
fiscal year 2005 as reported in Form 10-K-SBA, have been omitted.
Note
2. Organization
and Business Operations
Calibre
Energy, Inc. is an exploration and production company focused on the
acquisition, exploitation and development of high quality, long-lived producing
and non-producing fractured gas and oil shale properties in selected producing
basins in North America. Headquartered in Washington, DC and Houston, Texas,
Calibre is a Delaware corporation that was formed on August 17,
2005.
Calibre
completed a reverse merger into a public company, Hardwood Doors and Milling
Specialties, Inc. (“Hardwood”), on January 27, 2006, in which Calibre obtained a
controlling interest. See Note 6 for details.
Calibre
anticipates applying a business model to achieve substantial annual growth
in
production and reserves with a relatively low risk approach. These plans include
deploying known techniques for use in identifying, predicting, and optimizing
future production volumes and rates. Using multi-discipline teams with core
competencies of petrophysics, reservoir and production engineering, geology
and
geophysics, the Calibre’s emphasis will be on the practical integrated
application of these technologies to identify previously “hidden” potential.
This model mitigates conventional exploration risk because Calibre will focus
on: a) shales that are laterally extensive (pervasive); b) basins where the
target zones have been previously penetrated and found to be productive; c)
shales that have been successfully fraced (contained); d) cuttings utilized
to
validate source rock potential, porosity, and permeability; and e) projects
that
will be financially leveraged.
F-23
Notes
to Financial Statements
Note
3. Summary
of Significant Accounting Policies
Use
of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Calibre’s
financials are based on a number of significant estimates, including oil and
gas
reserve quantities which are the bases for the calculation of depreciation,
depletion and impairment of oil and gas properties, and timing and costs
associated with its retirement obligations.
Employee
Stock Plan
In
December 2004, the FASB issued SFAS No.123R, "Accounting for Stock-Based
Compensation" (“SFAS No. 123R”). SFAS No.123R establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services. This Statement focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions. SFAS No.123R requires that the fair value of such equity
instruments be recognized as expense in the historical financial statements
as
services are performed. Prior to SFAS No.123R, only certain pro forma
disclosures of fair value were required. SFAS No.123R shall be effective for
small business issuers as of the beginning of the first interim or annual
reporting period that begins after December 15, 2005. Calibre adopted SFAS
No.
123R as of January 1, 2006.
Note
4. Going
Concern
As
shown
in the accompanying financial statements, Calibre has incurred operating losses
since inception and expects to continue to incur losses through 2006. Calibre’s
business plan requires substantial capital investment prior to achieving
sufficient positive cash flow to sustain its operations. Future profitability
is
dependent on the success of our exploration programs. These factors raise
substantial doubt about our ability to continue as a going concern. Calibre’s
ability to achieve and maintain profitability and positive cash flow is
dependent upon Calibre’s ability to locate profitable properties, generate
revenue from their planned business operations, and control exploration cost.
Management plans to fund its future operations from additional financings and
commercial production of its exploration programs. However, there is no
assurance that we will be able to obtain additional financing from investors
or
private lenders and, if available, such financing may not be on commercial
terms
acceptable to Calibre or its shareholders or that our exploration programs
will
be successful.
F-24
Notes
to Financial Statements
Note
5. Related Party Transactions
Our
President and Chairman, Mr. Prentis B. Tomlinson, Jr., owns approximately an
18%
(on a fully diluted basis) stake of Kerogen Resources, Inc., a privately held
oil and gas exploration company and served as a Director and Chairman of the
Board of Directors from its formation in July 2005 until April 21, 2006.
We
are
parties to a letter agreement with Kerogen Resources pursuant to which we are
participating in the Reichmann project. During the period ending March 31,
2006,
pursuant to such agreement we have paid Kerogen $1,361,643. Kerogen then paid
such amount to Reichmann Petroleum Corporation as reimbursement of operating
expenses.
We
have
entered into a Participation Agreement with Kerogen Resources for the
exploration and development of prospects in the South Fort Worth Basin. Pursuant
to this agreement we are obligated to pay Kerogen Resources $597,000 for its
identification of prospects; we have paid Kerogen Resources $500,000 of such
amount as of March 31, 2006, although no payments were made in the period ending
March 31, 2006 in respect to this agreement. Additionally, we have advanced
$666,637 to Kerogen for participation in leases in the Ft. Worth Basin of Texas.
The price paid for leases represented market prices for similar acreage in
the
area.
We
have
entered into a Participation Agreement with Kerogen Resources for the
exploration and development of prospects in the Williston Basin. Pursuant to
this agreement we are obligated to pay Kerogen Resources $638,600 for its
identification of prospects; we have paid Kerogen Resources $550,000 of such
amount as of March 31, 2006. However, we made no payments to Kerogen during
the
period ending March 31, 2006 in respect to this agreement. The terms of
participation by Calibre in the Agreements for both the Ft. Worth Basin and
the
Williston Basin are similar to Agreements entered into with other industry
companies with KRI in these basins.
We
held a
promissory note issued by Kerogen Resources. The principal owed pursuant to
the
note was $300,000 and it did bear interest at the rate of 6.25% per annum.
The
principal of this note and accrued interest thereon was due and payable in
a
single installment on the maturity date. The maturity date was the earlier
of
September 30, 2006 or the date on which Kerogen Resources received gross
proceeds of at least $6,000,000 from a sale of equity, in one or more
transactions. We
acquired the note from Mr. Tomlinson in October 2005 in exchange for a payment
of $300,000. This note was entered into by Mr. Tomlinson, a founder of Calibre
Energy, in anticipation of the formation of Calibre Energy. After the
incorporation of Calibre Energy, the company entered into agreements with
Kerogen for the purpose of identification, exploration
and development of prospects in the Fort Worth Basin
and
Williston Basin. The Reichmann Petroleum Project and South Fort Worth Basin
project are projects identified by these agreements.
On March
24, 2006, Kerogen Resources repaid $314,623.29, the full amount of the
promissory note and all interest due. The note in the amount of $300,000 was
paid on March 24, 2006 together with interest in the amount of
$14,623.29.
On
March
24, 2006, we loaned $350,000 to Standard Drilling, Inc. pursuant to a loan
bearing interest at 4% per annum. On April 7, 2006 Standard Drilling, Inc.
repaid us $350,544.54, the full amount of the loan with all interest due.
Mr. Tomlinson, our President, controls a limited liability company that, at
the
time of the loan, owned 53% of Standard Drilling, Inc. Further, Standard
Drilling’s principal officers also serve as officers of Calibre.
F-25
Notes
to Financial Statements
Note
6.
Shareholders’ Equity
Reverse
Merger
On
January
27, 2006, pursuant to an Amended and Restated Agreement and Plan of
Reorganization dated as of January 17, 2006 by and among Hardwood Doors and
Milling Specialties, Inc., a Nevada corporation (”Hardwood”),
Calibre Acquisition Co., a Delaware corporation (“Merger
Sub”),
and
Calibre Energy, Inc., a Delaware corporation (“Calibre
Energy Delaware”),
( the
“Merger Agreement”), Merger Sub was merged with and into Calibre Energy
Delaware, and Calibre Energy Delaware became a wholly-owned subsidiary of
Hardwood (the “Merger”).
As a
result of the Merger, Hardwood, which previously had no material operations,
acquired the business of Calibre Energy Delaware. For accounting purposes,
this
reorganization was treated as a reverse merger, with Calibre Energy, Inc.
being
the accounting acquirer and the go-forward financial statements reflect
Calibre’s history from its inception on August 17, 2005.
Each
outstanding share of common stock of Calibre Energy Delaware was converted
into
one share of common stock of Hardwood. All outstanding options and warrants
to
purchase common stock of Calibre Energy Delaware were assumed by Calibre
and
converted into options and warrants to purchase an equal number of shares
of
common stock of Hardwood. The Merger resulted in a change of control of
Hardwood, with the former security holders of Calibre Energy Delaware owning
approximately 93.0% of Hardwood’s outstanding common stock, or approximately
93.7% assuming the exercise of all outstanding options and warrants, following
the closing of the Merger.
In
the
Merger, Hardwood issued 47,000,000 shares of its common stock in exchange
for
47,000,000 shares of common stock of Calibre Energy Delaware and reserved
for
issuance (1) 10,000,000 shares of common stock pursuant to outstanding warrants
to purchase common stock of Calibre Energy Delaware that were assumed by
Hardwood, and (2) 6,425,000 shares of common stock pursuant to outstanding
options to purchase common stock of Calibre Energy Delaware pursuant to the
Calibre Energy, Inc. 2005 Stock Incentive Plan that were assumed by Hardwood.
In
connection with the Merger, Calibre paid Hardwood $100,000 as a deposit pursuant
to the Merger Agreement. A condition to the Merger was an agreement by the
then
principal stockholder of Hardwood to cancel, immediately prior to the Merger,
19,575,000 outstanding shares of common stock of Hardwood that had been issued
to the principal shareholder. In consideration of such cancellation, Hardwood
paid the principal shareholder $100,000, and Calibre
recognized recapitalization expense of $100,000. The then principal
shareholder of Hardwood also assumed the net liabilities of Hardwood. As
a
result of the Merger, Hardwood has 50,525,000 shares of common stock issued
and
outstanding and an additional 18,425,000 shares of common stock reserved
for
issuance as described above.
F-26
Notes
to Financial Statements
In
connection with the consummation of the Merger, we changed our name to Calibre
Energy, Inc
|
Note
7.
|
2005
Stock Incentive Plan.
|
Calibre
adopted the 2005 Stock Incentive Plan (the “Plan”) in October 2005. The Plan is
designed to qualify under the Internal Revenue Code as an incentive stock option
plan. Under the Plan, options may be granted to key employees and other persons
who contribute to the success of Calibre. Calibre has reserved 9,000,000 shares
of common stock for the plan. Option
awards are generally granted with an exercise price equal to the market price
of
Calibre’s stock at the date of grant.
No
options were granted or exercised during the three month period ended March
31,
2006.
During
2005, we granted a total of 5,800,000 fully vested options including 5,150,000
options at an exercise price of $.05 per share and 650,000 shares at an exercise
price ranging from $0.12 to $0.24 per share. Compensation expense recorded
through December 31, 2005 for the options granted was $1,504,500.
We
also
granted a total of 650,000 nonvested options including options to purchase
50,000 shares of common stock at an exercise price of $.12 per share, and
options to purchase 600,000 shares of common stock at an exercise price of
$.24
per share. All nonvested options vest over a four year service period and expire
10 years after the date of grant. For the three month period ended March 31,
2006, Calibre recorded compensation expense of $10,251 to amortize the cost
of
nonvested options issued prior to the adoption of SFAS No. 123R.
The
fair
value of each option granted is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions: dividend yield $0, expected volatility of 57.99%, risk-free
interest rate of 5.0%, and expected lives of 10 years.
The
expected term of options granted is derived from the output of the option
valuation model and represents the period of time that options granted are
expected to be outstanding. The risk-free rate for periods within the
contractual life of the option is based on the U.S. Treasury yield curve in
effect at the time of grant.
A
summary
of Calibre’s nonvested shares as of March 31, 2006, and changes during the three
months ended March 31, 2006, is presented below:
|
Nonvested
Shares
|
Shares
|
Weighted-
Average
Grant-Date
Fair
Value
|
|||||
|
Nonvested
at January 1, 2006
|
650,000
|
$
|
162,629
|
||||
|
Granted
|
-
|
||||||
|
Vested
|
-
|
||||||
|
Forfeited
|
-
|
||||||
|
Nonvested
at March 31, 2006
|
650,000
|
$
|
162,629
|
F-27
Notes
to Financial Statements
Note
8.
Subsequent Events
Private
Placement
On
April
18, 2006 Calibre completed a private placement to institutional and other
accredited investors in which it sold 5,780,000
units. Each unit, composed of one share of common stock and a warrant to
purchase a share of common stock, was sold at a price of $2.00 per unit.
Aggregate
gross proceeds to Calibre were $11,560,000.
Offering costs were $ 888,800 and will be reflected as a reduction in the
proceeds. At March 31, 2006, Calibre had received net proceeds from stock
issuances of $5,814,594 (gross proceeds of $6,320,000 less $505,406 of offering
costs). Each warrant issued entitles the holder to acquire one additional share
of Calibre common stock at an exercise price of U.S. $2.75 per share at any
time on or before two years following the date of issuance. Provided that if
the
closing price of our common stock on any exchange on which the common stock
is
traded or quoted equals or exceeds U.S.$4.00 for 20 consecutive trading days
and
if either: (i) a registration statement registering the re-sale of the shares
issuable upon exercise of the warrants has been declared effective, or (ii)
Calibre has completed a “Canadian Going Public Transaction” as referred to in
the Warrant under the caption “Canadian Reporting Issuer Status,” then the
warrant term shall be automatically reduced to 30 days from the date of initial
issuance of a news release by Calibre announcing the change to the warrant
term.
In
connection with sales outside the United States, Calibre Energy paid finders
fees totaling $888,800 and issued to the finders warrants to acquire a total
of
577,500 shares on the same terms as those warrants issued to the investors
except that the exercise price for the finders warrants is $2.00 per
share.
F-28
|
|
|||||||
|
(unaudited)
|
|||||||
|
|
June
30,
|
December
31,
|
|||||
|
2006
|
2005
|
||||||
|
Assets
|
|||||||
|
Current
Assets
|
|||||||
|
Cash
|
$
|
4,649,432
|
$
|
2,105,749
|
|||
|
Accounts
receivable -Oil and gas sales
|
97,406
|
33,960
|
|||||
|
Note
receivable - related party
|
-
|
300,000
|
|||||
|
Prepaid
expenses and other
|
20,621
|
104,100
|
|||||
|
Total
current assets
|
4,767,459
|
2,543,809
|
|||||
|
Noncurrent
Assets
|
|||||||
|
Oil
and gas properties, using full cost method
|
|||||||
|
Properties
subject to amortization
|
7,325,495
|
830,646
|
|||||
|
Properties
not subject to amortization
|
5,653,718
|
4,478,235
|
|||||
|
Furniture
and office equipment
|
361,101
|
121,778
|
|||||
|
Less:
Accumulated depreciation, depletion, amortization and
impairment
|
(121,079
|
)
|
(35,599
|
)
|
|||
|
Net
property, furniture and office equipment
|
13,219,235
|
5,395,060
|
|||||
|
Advances
to operator-related party
|
784,649
|
-
|
|||||
|
Other
assets
|
22,662
|
-
|
|||||
|
Total
assets
|
$
|
18,794,006
|
$
|
7,938,869
|
|||
|
Liabilities
and Shareholders’ Equity
|
|||||||
|
Current
Liabilities
|
|||||||
|
Accounts
payable - trade
|
1,447,435
|
946,852
|
|||||
|
Accounts
payable - related party
|
1,031,650
|
-
|
|||||
|
Accounts
payable - employees
|
-
|
98,630
|
|||||
|
Accrued
expenses
|
52,751
|
20,482
|
|||||
|
Total
liabilities
|
2,531,836
|
1,065,964
|
|||||
|
Shareholders’
Equity
|
|||||||
|
Preferred
stock; $.001 par value; 10,000,000 authorized; none issued
|
-
|
-
|
|||||
|
Common
stock; $.001 par value; 100,000,000 authorized; 56,600,806 and
47,000,000
issued and outstanding at June 30, 2006, and December 31, 2005,
respectively
|
56,601
|
47,000
|
|||||
|
Additional
paid-in capital
|
19,367,853
|
8,727,556
|
|||||
|
Accumulated
deficit
|
(3,162,285
|
)
|
(1,901,651
|
)
|
|||
|
Total
shareholders’ equity
|
16,262,169
|
6,872,905
|
|||||
|
Total
liabilities and shareholders’ equity
|
$
|
18,794,006
|
$
|
7,938,869
|
|||
F-29
|
Calibre
Energy, Inc.
|
|||||||
|
|
|||||||
|
For
the Three Months and Six Months Ended June 30, 2006
|
|||||||
|
(unaudited)
|
|||||||
|
Three
Months
Ended
June
30, 2006
|
Six
Months
Ended
June
30, 2006
|
||||||
|
Revenue
|
|||||||
|
Oil
& Gas Sales
|
$
|
90,761
|
$
|
129,899
|
|||
|
Total
revenue
|
90,761
|
129,899
|
|||||
|
Operating
expenses
|
|||||||
|
Lease
operating expense
|
19,969
|
16,430
|
|||||
|
Severance
and ad valorem taxes
|
6,846
|
10,063
|
|||||
|
Depletion
expense
|
53,448
|
85,479
|
|||||
|
Compensation
expense
|
250,729
|
610,280
|
|||||
|
Professional
fees
|
219,245
|
420,810
|
|||||
|
General
and administrative (excluding compensation expense and professional
fees)
|
171,086
|
315,132
|
|||||
|
Total
operating expense
|
721,323
|
1,458,194
|
|||||
|
Loss
from operations
|
(630,562
|
)
|
(1,328,295
|
)
|
|||
|
Interest
income
|
43,542
|
67,663
|
|||||
|
Net
loss
|
$
|
(587,020
|
)
|
$
|
(1,260,633
|
)
|
|
|
Earnings
per share:
|
|||||||
|
Basic
and diluted
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
|
|
Weighted
average shares outstanding
|
56,705,704
|
49,755,558
|
|||||
F-30
|
Calibre
Energy, Inc.
|
||||||||||||||||
|
|
||||||||||||||||
|
For
the Six Months Ended June 30, 2006
|
||||||||||||||||
|
(unaudited)
|
||||||||||||||||
|
|
Common
Stock
|
Additional
|
|
|||||||||||||
|
|
Paid-in
|
Accumulated
|
||||||||||||||
|
|
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
|||||||||||
|
Balance,
December 31, 2005
|
47,000,000
|
$
|
47,000
|
$
|
8,727,556
|
$
|
(1,901,651
|
)
|
$
|
6,872,905
|
||||||
|
Reverse
merger
|
3,525,000
|
3,525
|
(3,525
|
)
|
-
|
|||||||||||
|
Issuance
of common stock for cash, net of offering costs
|
3,160,000
|
3,160
|
5,811,434
|
5,814,594
|
||||||||||||
|
Cashless
exercise of warrants
|
295,806
|
296
|
(296
|
)
|
-
|
|||||||||||
|
Option
expense
|
10,253
|
10,253
|
||||||||||||||
|
Net
loss
|
(673,612
|
)
|
(673,612
|
)
|
||||||||||||
|
Balance,
March 31, 2005
|
53,980,806
|
$
|
53,981
|
$
|
14,545,422
|
$
|
(2,575,263
|
)
|
$
|
12,024,140
|
||||||
|
Issuance
of common stock for cash, net of offering costs
|
2,620,000
|
2,620
|
4,812,180
|
4,814,800
|
||||||||||||
|
Option
expense
|
10,251
|
10,251
|
||||||||||||||
|
Net
loss
|
(587,020
|
)
|
(587,020
|
)
|
||||||||||||
|
Balance,
June 30, 2006
|
56,600,806
|
$
|
56,601
|
$
|
19,367,853
|
$
|
(3,162,283
|
)
|
$
|
16,262,171
|
||||||
F-31
|
Calibre
Energy, Inc.
|
||||
|
|
||||
|
For
the Six Months Ended June 30, 2006
|
||||
|
(unaudited)
|
||||
|
Cash
Flows from Operating Activities
|
||||
|
Net
loss
|
$
|
(1,260,633
|
)
|
|
|
Adjustments
to reconcile net loss to net cash provided by operating
activities:
|
||||
|
Noncash recapitalization
expense
|
100,000
|
|||
|
Accretion
of stock option expense
|
20,504
|
|||
|
Depreciation
and depletion expense
|
85,479
|
|||
|
Changes
in working capital components:
|
||||
|
(Increase)
in accounts receivable
|
(63,446
|
)
|
||
|
(Increase)
in other current assets
|
(16,521
|
)
|
||
|
(Increase)
in other assets
|
(22,662
|
)
|
||
|
Increase
in accounts payable
|
1,433,603
|
|||
|
Increase
in accrued expense
|
32,269
|
|||
|
Net
cash (used in) operating activities
|
308,594
|
|||
|
Cash
Flows from Investing Activities
|
||||
|
Additions
to oil and gas properties
|
(8,454,980
|
)
|
||
|
Additions
to furniture, office equipment, other assets and leasehold
improvements
|
(239,325
|
)
|
||
|
Receipts
on notes receivable
|
650,000
|
|||
|
Disbursements
on note receivable
|
(350,000
|
)
|
||
|
Net
cash (used in) investing activities
|
(8,394,305
|
)
|
||
|
Cash
Flows from Financing Activities
|
||||
|
Proceeds
from sale of common stock
|
10,629,394
|
|||
|
Net
cash provided by financing activities
|
10,629,394
|
|||
|
Net
increase in cash
|
$
|
2,543,683
|
||
|
Cash
|
||||
|
Beginning
of period
|
$
|
2,105,749
|
||
|
End
of period
|
$
|
4,649,432
|
||
|
Supplemental
cash flow information:
|
||||
|
Interest
paid
|
-
|
|||
|
Income
taxes paid
|
-
|
|||
F-32
Notes
to Financial Statements
CALIBRE
ENERGY, INC.
(Unaudited)
Note
1. Basis
of Presentation
The
accompanying unaudited interim financial statements of Calibre Energy, Inc.
have
been prepared in accordance with accounting principles generally accepted
in the
United States of America and the rules of the Securities and Exchange
Commission, and should be read in conjunction with the audited financial
statements and notes thereto contained in Calibre’s annual report filed with the
SEC on Form 10K-SB/A for the period ending December 31, 2005. In the opinion
of
management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and the results of
operations for the interim periods presented have been reflected herein.
The
results of operations for interim periods are not necessarily indicative
of the
results to be expected for the full year. Notes to the financial statements
which would substantially duplicate the disclosure contained in the audited
financial statements for the most recent fiscal year 2005 as reported in
Form
10K-SB/A, have been omitted.
Certain
reclassifications have been made to amounts in prior periods to conform with
the
current period presentation.
Note
2. Organization
and Business Operations
Calibre
Energy, Inc. is an exploration and production company focused on the
acquisition, exploitation and development of high quality, long-lived producing
and non-producing fractured gas and oil shale properties in selected producing
basins in North America. Headquartered in Washington, DC and Houston, Texas,
Calibre is a Nevada corporation that was formed on August 17, 2005.
Calibre
intends to expand and develop our exploration and production business and
its
reserves by initially emphasizing the identification and development of shale
gas opportunities in the Barnett Shale and the Fayetteville Shale. Calibre
has
identified that the Mississippian developments of the Barnett Shale in the
Ft.
Worth Basin and the Fayetteville Shale development in the Arkoma Basin provide
the greatest near term economic value. Calibre is currently participating
in
three projects with Kerogen Resources, Inc., a privately held exploration
and
production company located in Houston, Texas, the Reichmann Petroleum project,
South Ft. Worth Basin project and Williston Basin project.
Note
3. Summary
of Significant Accounting Policies
Stock
Based Compensation
Calibre
adopted Statement of Financial Accounting Standards No. 123R, Share-Based
Payment, effective January 1, 2006. Accordingly, Calibre began recording
compensation expense associated with stock options and other forms of equity
compensation in accordance with SFAS No. 123R, as interpreted by SEC Staff
Accounting Bulletin No. 107. Prior to January 1, 2006, Calibre had accounted
for
stock options according to the provisions of Accounting Principles Board
Opinion
No. 25, Accounting for Stock
F-33
Notes
to Financial Statements
Issued
to
Employees, and related interpretations, and therefore no related compensation
expense was recorded for awards granted with no intrinsic value. Calibre
adopted
the modified prospective transition method provided for under SFAS No. 123R,
and, consequently, has not retroactively adjusted results from prior periods.
Under this transition method, compensation cost associated with the issuance
of
stock options will be recognized as a quarterly amortization based on the
grant-date fair value estimated in accordance with the provisions of SFAS
No.
123R. See Note 6.
Note
4. Going
Concern
As
shown
in the accompanying financial statements, Calibre has incurred operating
losses
since inception and expects to continue to incur losses through 2006. Calibre’s
business plan requires substantial capital investment prior to achieving
sufficient positive cash flow to sustain its operations. Future profitability
is
dependent on the success of our exploration programs. These factors raise
substantial doubt about our ability to continue as a going concern. Calibre’s
ability to achieve and maintain profitability and positive cash flow is
dependent upon Calibre’s ability to locate profitable properties, generate
revenue from their planned business operations, and control exploration cost.
Management plans to fund its future operations from additional financings
and
commercial production of its exploration programs. However, there is no
assurance that we will be able to obtain additional financing from investors
or
private lenders and, if available, such financing may not be on commercial
terms
acceptable to Calibre or its shareholders or that our exploration programs
will
be successful.
Note
5. Related
Party Transactions
Calibre
is
party to a letter agreement with Kerogen Resources pursuant to which we are
participating in the Reichmann project. During the six month period ending
June
30, 2006, pursuant to such agreement we have paid $3,068,182 to Kerogen,
including $1,706,539 in the three month period ending June 30, 2006. Kerogen
then paid such amount to Reichmann Petroleum Corporation as reimbursement
of
capital and operating expenses.
Calibre
has entered into a Participation Agreement with Kerogen Resources for the
exploration and development of prospects in the South Ft. Worth Basin. Pursuant
to this agreement we are obligated to pay Kerogen Resources $597,000 for
its
identification of prospects; we have paid Kerogen Resources $500,000 of such
amount to date, although no payments were made in the period ending June
30,
2006 under this agreement. Additionally, we have advanced $1,184,154 to Kerogen
for participation in leases in the Hill County area of Texas, including $517,517
in the three months ending June 30, 2006.
We
have
entered into a Participation Agreement with Kerogen Resources for the
exploration and development of prospects in the Williston Basin. Pursuant
to
this agreement we are obligated to pay Kerogen Resources $638,600 for its
identification of prospects; we have paid Kerogen Resources $550,000 of such
amount to date. However, we made no payments to Kerogen during the period
ending
June 30, 2006 in respect to this agreement.
F-34
Notes
to Financial Statements
We
believe
all of the transactions with related parties have been on terms no less
favorable to us than those terms which may have been obtained from unrelated
third parties.
|
Note
6.
|
2005
Stock Incentive Plan
|
Calibre
adopted the 2005 Stock Incentive Plan (the “Plan”) in October 2005. Under the
Plan, options may be granted to key employees and other persons who contribute
to the success of Calibre. Calibre has reserved 9,000,000 shares of common
stock
for the plan. Option awards are generally granted with an exercise price
equal
to the market price of Calibre’s stock at the date of grant. No options were
granted or exercised during the three month period ended June 30, 2006.
We
granted
a total of 650,000 nonvested options including options to purchase 50,000
shares
of common stock at an exercise price of $.12 per share, and options to purchase
600,000 shares of common stock at an exercise price of $.24 per share. All
nonvested options vest over a four year service period and expire 10 years
after
the date of grant. For the three month period ended June 30, 2006,
Calibre
recorded
compensation expense of $10,251 to amortize the cost of nonvested options
over
the service period of the options.
The
fair
value of each option granted is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions: dividend yield 0%, expected volatility of 57.99%, risk-free
interest rate of 5.0%, and expected lives of 10 years. The expected term
of
options granted is derived from the output of the option valuation model
and
represents the period of time that options granted are expected to be
outstanding. The risk-free rate for periods within the contractual life of
the
option is based on the U.S. Treasury yield curve in effect at the time of
grant.
A
summary
of Calibre’s nonvested shares as of June 30, 2006, and changes during the six
months ended June 30, 2006, is presented below:
|
Nonvested
Shares
|
Shares
|
Weighted-
Average
Grant-Date
Fair
Value
|
|||||
|
Nonvested
at January 1, 2006
|
650,000
|
$
|
162,629
|
||||
|
Granted
|
-
|
||||||
|
Vested
|
-
|
-
|
|||||
|
Forfeited
|
-
|
||||||
|
Nonvested
at June 30, 2006
|
650,000
|
$
|
162,629
|
F-35
Notes
to Financial Statements
As
of June
30, 2006, there was $142,125 of total unrecognized compensation cost related
to
nonvested share-based compensation arrangements granted under the Plan. That
cost is expected to be recognized over a weighted-average period of 3.5 years.
No shares vested or were exercisable during the six month period ended June
30,
2006.
Note
7. Warrants
Calibre’s
warrants outstanding and exercisable as of June 30, 2006 are:
|
Exercise
Price
|
Number
of shares
|
Remaining
life
|
Exercisable
Number of Shares Remaining
|
||||
|
$0.40
|
2,000,000
|
1.25
years
|
2,000,000
|
||||
|
$0.75
|
10,000,000
|
1.25
years
|
9,600,000
|
||||
|
$2.00
|
577,500
|
1.75
years
|
577,500
|
||||
|
$2.75
|
5,780,000
|
1.75
years
|
5,780,000
|
||||
|
18,357,500
|
17,957,500
|
During
the
first quarter of 2006, 400,000 warrants were exercised on a cashless basis
resulting in the issuance of 295,806 shares of common stock.
F-36
|
Calibre
Energy, Inc.
|
|||||||
|
(Unaudited)
|
|||||||
|
|
|
|
|||||
|
|
September
30,
|
December
31,
|
|||||
|
|
2006
|
2005
|
|||||
|
|
|
|
|||||
|
Assets
|
|
|
|||||
|
Current
Assets
|
|
|
|||||
|
Cash
|
$
|
3,409,807
|
$
|
2,105,749
|
|||
|
Accounts
receivable -
|
|||||||
|
Oil
and gas sales
|
262,159
|
33,960
|
|||||
|
Related
party
|
175,288
|
300,000
|
|||||
|
Prepaid
expenses and other
|
121,782
|
104,100
|
|||||
|
|
|||||||
|
Total
current assets
|
3,969,036
|
2,543,809
|
|||||
|
|
|||||||
|
Noncurrent
Assets
|
|||||||
|
Oil
and gas properties, using full cost method
|
|||||||
|
Properties
subject to amortization
|
7,258,594
|
830,646
|
|||||
|
Properties
not subject to amortization
|
10,780,675
|
4,478,235
|
|||||
|
Furniture
and office equipment
|
401,751
|
121,778
|
|||||
|
Less:
Accumulated depreciation, depletion, and amortization
|
(549,607
|
)
|
(35,599
|
)
|
|||
|
Net
property, furniture and office equipment
|
17,891,413
|
5,395,060
|
|||||
|
Advances
to operator-related party
|
520,723
|
-
|
|||||
|
Investments-equity
method
|
87,500
|
-
|
|||||
|
Other
assets
|
34,755
|
-
|
|||||
|
|
|||||||
|
Total
assets
|
$
|
22,503,427
|
$
|
7,938,869
|
|||
|
|
|||||||
|
Liabilities
and Shareholders’ Equity
|
|||||||
|
Current
Liabilities
|
|||||||
|
Accounts
payable - trade
|
1,223,464
|
946,852
|
|||||
|
Accounts
payable - related party
|
846,876
|
-
|
|||||
|
Accounts
payable - employees
|
98,630
|
||||||
|
Accrued
expenses
|
141,966
|
20,482
|
|||||
|
Total
liabilities
|
2,212,306
|
1,065,964
|
|||||
|
|
|||||||
|
Shareholders’
Equity
|
|||||||
|
Preferred
stock; $.001 par value; 10,000,000 authorized; none issued
|
-
|
||||||
|
Common
stock; $.001 par value; 100,000,000 authorized; 58,350,806
and 47,000,000
issued and outstanding at September 30, 2006, and December
31, 2005,
respectively
|
58,351
|
47,000
|
|||||
|
Additional
paid-in capital
|
24,199,329
|
8,727,556
|
|||||
|
Accumulated
deficit
|
(3,966,559
|
)
|
(1,901,651
|
)
|
|||
|
Total
shareholders’ equity
|
20,291,121
|
6,872,905
|
|||||
|
|
|||||||
|
Total
liabilities and shareholders’ equity
|
$
|
22,503,427
|
$
|
7,938,869
|
|||
F-37
|
Calibre
Energy, Inc.
|
||||||||||
|
For
the Three and Nine Months Ended September 30,
2006 and
|
||||||||||
|
for
the Period from August 17, 2005 (Inception) to September
30, 2005
|
||||||||||
|
(Unaudited)
|
||||||||||
|
|
|
|
|
|||||||
|
|
|
|
|
|||||||
|
|
|
|
|
|||||||
|
|
Three
Months Ended
|
Nine
Months Ended
|
Period
from August 17, 2005(Inception) until September 30,
|
|||||||
|
|
September
30, 2006
|
September
30, 2006
|
2005
|
|||||||
|
|
|
|
|
|||||||
|
Revenue:
|
|
|
|
|||||||
|
Oil &
gas sales
|
$
|
245,262
|
$
|
375,161
|
$
|
-
|
||||
|
|
||||||||||
|
Expenses:
|
||||||||||
|
Lease
operating
|
99,655
|
116,085
|
-
|
|||||||
|
Severance
and ad valorem taxes
|
18,421
|
28,485
|
-
|
|||||||
|
Depreciation,
depletion and amortization
|
428,527
|
514,008
|
-
|
|||||||
|
Compensation
expense
|
321,810
|
855,221
|
1,443,250
|
|||||||
|
Professional
fees
|
243,699
|
860,896
|
607
|
|||||||
|
General
and administrative
|
(39,008
|
)
|
156,606
|
9,160
|
||||||
|
|
1,073,104
|
2,531,301
|
1,453,017
|
|||||||
|
|
||||||||||
|
Net
Income (Loss) From Operations
|
(827,843
|
)
|
(2,156,140
|
)
|
(1,453,017
|
)
|
||||
|
|
||||||||||
|
Interest
income
|
23,569
|
91,231
|
1,731
|
|||||||
|
|
||||||||||
|
Net
Income (Loss)
|
(804,274
|
)
|
(2,064,909
|
)
|
(1,451,286
|
)
|
||||
|
|
||||||||||
|
Earnings
per share:
|
$
|
(0.01
|
)
|
$
|
(0.04
|
)
|
$
|
(0.04
|
)
|
|
|
Basic
and diluted
|
||||||||||
|
|
||||||||||
|
Weighted
average shares outstanding
|
56,704,747
|
54,300,690
|
34,691,730
|
|||||||
F-38
|
Calibre
Energy, Inc.
|
||||||||||||||||
|
For
the Nine Months Ended September 30, 2006
|
||||||||||||||||
|
(Unaudited)
|
||||||||||||||||
|
|
|
|
|
|
||||||||||||
|
|
Common
Stock
|
Additional
|
|
|
||||||||||||
|
|
|
|
Paid-in
|
Accumulated
|
|
|||||||||||
|
|
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
|||||||||||
|
Balance,
December 31, 2005
|
47,000,000
|
$
|
47,000
|
$
|
8,727,556
|
$
|
(1,901,651
|
)
|
$
|
6,872,905
|
||||||
|
|
||||||||||||||||
|
Issuance
of common stock for reverse merger
|
3,525,000
|
3,525
|
(3,525
|
)
|
-
|
|||||||||||
|
|
||||||||||||||||
|
Issuance
of common stock for cash, net of offering costs
|
3,160,000
|
3,160
|
5,811,434
|
5,814,594
|
||||||||||||
|
|
||||||||||||||||
|
Cashless
exercise of warrants
|
295,806
|
296
|
(296
|
)
|
-
|
|||||||||||
|
|
||||||||||||||||
|
Option
expense
|
10,253
|
10,253
|
||||||||||||||
|
|
||||||||||||||||
|
Net
loss
|
(673,612
|
)
|
(673,612
|
)
|
||||||||||||
|
|
||||||||||||||||
|
Balance,
March 31, 2005
|
53,980,806
|
$
|
53,981
|
$
|
14,545,422
|
$
|
(2,575,263
|
)
|
$
|
12,024,140
|
||||||
|
|
||||||||||||||||
|
Issuance
of common stock for cash, net of offering costs
|
2,620,000
|
2,620
|
4,812,180
|
4,814,800
|
||||||||||||
|
|
||||||||||||||||
|
Option
expense
|
10,251
|
10,251
|
||||||||||||||
|
|
||||||||||||||||
|
Net
loss
|
(587,020
|
)
|
(587,020
|
)
|
||||||||||||
|
|
||||||||||||||||
|
Balance,
June 30, 2006
|
56,600,806
|
$
|
56,601
|
$
|
19,367,853
|
$
|
(3,162,283
|
)
|
$
|
16,262,171
|
||||||
|
|
||||||||||||||||
|
Exercise
of warrants
|
1,750,000
|
1,750
|
4,810,750
|
4,812,500
|
||||||||||||
|
|
||||||||||||||||
|
Option
expense
|
20,726
|
20,726
|
||||||||||||||
|
|
||||||||||||||||
|
Net
loss
|
(804,274
|
)
|
(804,274
|
)
|
||||||||||||
|
|
||||||||||||||||
|
Balance,
September 30, 2006
|
58,350,806
|
$
|
58,351
|
$
|
24,199,329
|
$
|
(3,966,559
|
)
|
$
|
20,291,121
|
||||||
|
|
||||||||||||||||
F-39
|
For
the Nine Months Ended September 30, 2006
|
|||||||
|
and
for the Period from August 17, 2005 (Inception) until September
30,
2005
|
|||||||
|
(Unaudited)
|
|||||||
|
|
2006
|
2005
|
|||||
|
|
|
|
|||||
|
Cash
Flows from Operating Activities
|
|
|
|||||
|
Net
loss
|
$
|
(2,064,908
|
)
|
$
|
(1,451,286
|
)
|
|
|
Adjustments
to reconcile net loss to net cash provided by operating
activities:
|
|||||||
|
Noncash
recapitalization expense
|
100,000
|
-
|
|||||
|
Accretion
of stock option expense
|
41,230
|
1,470,250
|
|||||
|
Depreciation
and depletion expense
|
514,008
|
-
|
|||||
|
Changes
in working capital components:
|
|||||||
|
(Increase)
in accounts receivable
|
(403,487
|
)
|
-
|
||||
|
(Increase)
in other current assets
|
(117,683
|
)
|
-
|
||||
|
(Increase)
in accounts payable
|
(191,324
|
)
|
246,743
|
||||
|
Increase
in accrued expense
|
121,484
|
-
|
|||||
|
Net
cash (used in) operating activities
|
(2,000,680
|
)
|
265,707
|
||||
|
|
|||||||
|
Cash
Flows from Investing Activities
|
|||||||
|
Additions
to oil and gas properties
|
(12,034,930
|
)
|
(650,000
|
)
|
|||
|
Additions
to furniture, office equipment, other assets and leasehold
improvements
|
(314,728
|
)
|
(60,228
|
)
|
|||
|
Investment
in Potomac Energy
|
(87,500
|
)
|
-
|
||||
|
Receipts
on notes receivable
|
650,000
|
-
|
|||||
|
Disbursements
on note receivable
|
(350,000
|
)
|
-
|
||||
|
Net
cash (used in) investing activities
|
(12,137,158
|
)
|
(710,228
|
)
|
|||
|
|
|||||||
|
Cash
Flows from Financing Activities
|
|||||||
|
Proceeds
from sale of common stock
|
15,441,896
|
2,803,556
|
|||||
|
Net
cash provided by financing activities
|
15,441,896
|
2,803,556
|
|||||
|
|
|||||||
|
Net
increase in cash
|
$
|
1,304,058
|
$
|
2,359,035
|
|||
|
|
|||||||
|
Cash
|
|||||||
|
Beginning
of period
|
2,105,749
|
-
|
|||||
|
End
of period
|
3,409,807
|
2,359,035
|
|||||
|
|
|||||||
|
Supplemental
cash flow information:
|
|||||||
|
Interest
paid
|
-
|
-
|
|||||
|
Income
taxes paid
|
-
|
-
|
|||||
F-40
CALIBRE
ENERGY, INC.
(Unaudited)
Note
1.
Basis
of Presentation
The
accompanying unaudited interim financial statements of Calibre Energy,
Inc.
(“Calibre”) have been prepared in accordance with accounting principles
generally accepted in the United States of America and the rules of
the
Securities and Exchange Commission, and should be read in conjunction
with the
audited financial statements and notes thereto contained in Calibre’s annual
report filed with the SEC on Form 10K-SB/A for the period ending December
31,
2005. In the opinion of management, all adjustments, consisting of
normal
recurring adjustments, necessary for a fair presentation of financial
position
and the results of operations for the interim periods presented have
been
reflected herein. The results of operations for interim periods are
not
necessarily indicative of the results to be expected for the full year.
Notes to
the financial statements which would substantially duplicate the disclosure
contained in the audited financial statements for the most recent fiscal
year
2005 as reported in Form 10K-SB/A, have been omitted.
Certain
reclassifications have been made to amounts in prior periods to conform
with the
current period presentation.
Note
2.
Organization
and Business Operations
Calibre
is
an exploration and production company focused on the acquisition, exploitation
and development of high quality, long-lived producing and non-producing
fractured gas and oil shale properties in selected producing basins
in North
America and in anunexplored region of the Arbil Province of Kurdistan,
Iraq.
Headquartered in Washington, DC and Houston, Texas, Calibre is a Nevada
corporation that was formed on August 17, 2005.
Calibre
intends to expand and develop our exploration and production business
and
reserves by initially emphasizing the identification and development
of shale
gas opportunities in the Barnett Shale and the Fayetteville Shale and
the
development of an unexplored area of Kurdistan, Iraq. Calibre has identified
that the Mississippian developments of the Barnett Shale in the Ft.
Worth Basin
and the Fayetteville Shale development in the Arkoma Basin and the
Bina-Bawi
project in Arbil Province of Kurdistan provide the greatest near term
economic
value. Calibre is currently participating in three projects with Kerogen
Resources, Inc., a privately held exploration and production company
located in
Houston, Texas. The projects are the Reichmann Petroleum project, South
Ft.
Worth Basin project and Williston Basin project. Calibre also has acquired
10% participating interest in an Exploration and Production Sharing
Agreement with the Kurdish Regional Government in Kurdistan, Iraq,
pursuant to a
joint operating agreement with Hawler Energy, Ltd (Bina-Bawi Project).
Note
3.
Summary
of Significant Accounting Policies
Stock
Based Compensation
Calibre
adopted Statement of Financial Accounting Standards No. 123R, Share-Based
Payment, effective January 1, 2006. Accordingly, Calibre began recording
compensation expense associated with stock options and other forms
of equity
compensation in accordance with SFAS No. 123R, as interpreted by SEC
Staff
Accounting Bulletin No. 107. Prior to January 1, 2006, Calibre had
accounted for
stock options according to the provisions of Accounting Principles
Board Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations,
and therefore no related compensation expense was recorded for awards
granted
with no intrinsic value. Calibre adopted the modified prospective transition
method provided for under SFAS No. 123R, and, consequently, has not
retroactively adjusted results from prior periods. Under this transition
method,
compensation cost associated with the issuance of stock options will
be
recognized as a quarterly amortization based on the grant-date fair
value
estimated in accordance with the provisions of SFAS No. 123R. See Note
6.
During
the
period from inception (August 17, 2005) to September 30, 2005, Calibre
recognized $1,416,250 in share-based compensation expense. If compensation
cost
for our share-based compensation plan been determined consistent with
SFAS No.
123R, Calibre's net income and earnings per share would have been reduced
to the
following pro forma amounts:
|
|
Period
from Inception (August 17, 2005) to September 30, 2005
|
|
|
|
Net
loss, as reported
|
|
$1,451,286
|
|
|
Add:
Stock based intrinsic value included in report loss
|
|
1,416,250
|
|
|
Less:
Total stock-based employee compensation expense determined
under the fair
value based method for all awards
|
|
(1,549,446)
|
|
|
Pro-forma
net loss
|
|
$1,584,482
|
|
|
Basis
and diluted net loss per share
As
reported
|
|
$(0.04)
|
|
|
Pro-forma
|
|
$(0.05)
|
|
|
|
|
|
|
The
fair
value of each option granted is estimated on the date of grant using
the
Black-Scholes option-pricing model with the following weighted average
assumptions: dividend yield $0, expected volatility of 58%, risk-free
interest
rate of 5.0%, and expected lives of 10 years.
Investments
Investments
are accounted for under the equity method in circumstances where we
are deemed
to not exercise significant influence over the operations of the investee.
Under
the equity method, we recognize our share of the investee’s earnings and losses
in our consolidated statements of operations.
Included
in investments at September 30, 2006 is an equity investment of $87,500.
This
investment has been accounted for under the equity method.
Note
4.
Going
Concern
As
shown
in the accompanying financial statements, Calibre has incurred operating losses
since inception and expects to continue to incur losses for the next
twelve
months. Calibre’s business plan requires substantial capital investment prior to
achieving sufficient positive cash flow to sustain its operations.
Future
profitability is dependent on the success of its exploration programs.
These
factors raise substantial doubt about its ability to continue as a
going
concern. Calibre’s ability to achieve and maintain profitability and positive
cash flow is dependent upon Calibre’s ability to locate profitable properties,
generate revenue from their planned business operations, and control
exploration
cost. Management plans to fund its future operations from additional
financings
and commercial production of its exploration programs. However, there
is no
assurance that Calibre will be able to obtain additional financing
from
investors or private lenders and, if available, such financing may
not be on
commercial terms acceptable to Calibre or its shareholders or that
our
exploration programs will be successful.
F-41
Note
5.
Related
Party Transactions
Calibre
participates in certain oil and gas prospects with Kerogen Resources
(“Kerogen”)
in which Kerogen has identified and offered participation to Calibre.
Calibre’s
CEO owns approximately 16% of Kerogen.
Calibre
is
party to a letter agreement with Kerogen for participation in the Reichmann
project. During the nine month period ending September 30, 2006, pursuant
to
such agreement we have paid $4,890,123 to Kerogen, including $1,770,240
in the
three month period ending September 30, 2006. Kerogen then paid such
amount to
Reichmann Petroleum Corporation as reimbursement of capital and operating
expenses.
Calibre
has entered into a Participation Agreement with Kerogen for the exploration
and development of prospects in the South Ft. Worth Basin. Calibre
is obligated
to pay Kerogen $597,000 for its identification of prospects; Calibre
has paid
Kerogen $500,000 of such amount through September 30, 2006, although
no payments
were made in the three month period ending September 30, 2006 under
this
agreement. Additionally, Calibre has advanced $1,822,427 to Kerogen
for
participation in leases in the Hill County area of Texas, including
$638,273 in
the three months ended September 30, 2006.
Calibre
has entered into a Participation Agreement with Kerogen for the exploration
and
development of prospects in the Williston Basin. Calibre is obligated
to pay
Kerogen $638,600 for its identification of prospects; Calibre has paid
Kerogen
$550,000 of such amount through September 30, 2006, although, no payments
were
made to Kerogen during the three month period ending September 30,
2006 under
this agreement.
Calibre
has entered into a Joint Operating Agreement ("JOA") with Hawler Energy,
Ltd
("Hawler"), a wholly owned subsidiary of Prime Natural Resources. W.
Richard Anderson, a Director of Calibre, is the CEO of Prime Natural
Resources. The JOA with Hawler makes the Company party to and gives
the Company
a 10% interest in an Exploration and Production Sharing Agreement with the
Kurdish Regional Government for the exploration and development of
the Bina Bawi
prospect. Calibre is obligated to pay Hawler $5,500,000; Calibre has paid
Hawler $2,000,000 of such amount during the three month period ending
September
30, 2006.
Calibre
shares facilities and some overhead costs with Standard Drilling, Inc.("Standard
Drilling"), a related partner that has certain common executive officers,
in Washington D.C. Calibre has entered into a service agreement pursuant
to
which Standard Drilling will pay Calibre for office space and supplies,
use of
office equipment, secretarial services and any other services Calibre
provide to
Standard Drilling in sharing the Washington D.C. office space. Standard
Drilling
reimburses Calibre for 50% of the costs of the health insurance provided
to
officers who are employed by both companies. The average payment by
Standard
Drilling to Calibre under the services agreement is expected to be
$70,000 per
quarter for 2006 and will be reviewed for any potential adjustment
in January
2007. The services agreement may be terminated by either party on 30
days
notice.
Potomac
Energy, LLC (“Potomac”) is a joint venture entity formed by Calibre and Standard
Drilling to acquire software licenses and data sufficient to build
and maintain
a land title database that will cover a portion of the Ft. Worth Basin
in north
central Texas. Calibre and Standard Drilling each own 50% of Potomac,
and each
contributed $87,500 to Potomac in the quarterly period ended September
30, 2006.
Calibre and Standard Drilling will share 50/50 in all costs of Potomac.
Each
Company will have access to the Potomac database. In addition, Calibre
will have
a right to participate in 50% of any prospect generated by the database.
Potomac
had no other activities in the period ended September 30, 2006 other
than the
purchase of software and has no assets other than the software. Potomac
is
governed by a two person board comprised of one representative of Calibre
and
one representative of Standard Drilling. William B. Nunnallee ,Calibre’s Vice
President of Land, serves as an officer and director of Potomac.
Calibre
believes all of the transactions with related parties have been on
terms no less
favorable to it than those terms which may have been obtained from
unrelated
third parties.
Note
6.
2005
Stock Incentive Plan
Calibre
adopted the 2005 Stock Incentive Plan (the “Plan”) in October 2005. Under the
Plan, options may be granted to key employees and other persons who
contribute
to the success of Calibre. Calibre has reserved 9,000,000 shares of
common stock
for the plan. Option awards are generally granted with an exercise
price equal
to the market price of Calibre’s stock at the date of grant. No options were
exercised during the three month period ended September 30, 2006.
During
the
three month period ended September 30, 2006, Calibre issued 100,000
incentive
stock options to an employee of Calibre with an exercise price of $2.10.
These
options expire on July 27, 2016, vest 25% on each anniversay of the
date of issuance over 4 years and had a fair value of $167,594 at the
date of grant. Calibre valued these options using the Black-Scholes
option
-pricing valuation model. The model uses market sourced inputs such
as interest
rates, stock prices, and option volatilities, the selection of which
requires
management’s judgment, and which may impact the value of the options. The
assumptions used in the Black-Scholes valuation model were: a risk-free
interest
rate of 5.00%; the current stock price at date of issuance of $2.10
per share;
the exercise price of the options of $2.10 per share; the term of 10
years;
volatility of 70.94%; and dividend yield of 0.0%. For the three month
period
ended September 30, 2006, Calibre recorded compensation expense of
$10,475 to
amortize the cost of these non-vested options over the service period
of the
options.
Prior
to
January 1, 2006, Calibre granted a total of 650,000 non-vested options
including
options to purchase 50,000 shares of common stock at an exercise price
of $0.12
per share, and options to purchase 600,000 shares of common stock at
an exercise
price of $0.24 per share. All non-vested options vest over a four year
service
period and expire 10 years after the date of grant. At September 30,
2006,
Calibre had compensation expense of $162,629 to amortize the cost of
these
non-vested options over the service period of the options.
A
summary
of option activity as of September 30, 2006, and changes during the
nine months
ended September 30, 2006 is presented below:
|
Options
|
Shares
|
Weighted-Average
Exercise Price
|
Weighted-Average
Remaining Contractual Term
|
Aggregate
Intrinsic Value
|
|||||||||
|
Outstanding
at January 1, 2006
|
6,450,000
|
$
|
0.09
|
9.05
|
|||||||||
|
Granted
|
100,000
|
$
|
2.10
|
9.75
|
|||||||||
|
Exercised,
forfeited, or expired
|
-
|
-
|
-
|
-
|
|||||||||
|
Outstanding
at September 30, 2006
|
6,550,000
|
$
|
0.12
|
9.06
|
$
|
15,781,000
|
|||||||
|
|
|||||||||||||
|
Exercisable
at September 30, 2006
|
6,550,000
|
$
|
0.12
|
9.06
|
$
|
15,781,000
|
|||||||
The
weighted-average grant-date fair value of options granted during the
nine months
ended September 30, 2006 was $1.68 per share
A
summary
of Calibre’s non-vested shares as of September 30, 2006 and changes during the
nine months ended September 30, 2006, is presented below:
|
Nonvested
Shares
|
Shares
|
Weighted-
Average
Grant-Date
Fair
Value
|
|||||
|
Nonvested
at January 1, 2006
|
650,000
|
$
|
0.25
|
||||
|
Granted
|
100,000
|
$
|
1.68
|
||||
|
Vested
|
-
|
-
|
|||||
|
Forfeited
|
-
|
-
|
|||||
|
Nonvested
at September 30, 2006
|
750,000
|
$
|
0.44
|
||||
As
of
September 30, 2006, there was $288,991 of total unrecognized compensation
cost
related to nonvested share-based compensation arrangements granted
under the
Plan. That cost is expected to be recognized over a weighted-average
period of
3.3 years. No shares vested or were exercised during the nine month
period ended
September 30, 2006.
F-42
Note
7. Warrants
Calibre’s
warrants outstanding and exercisable as of September 30, 2006 are:
|
|
|
|
|
|
Exercise
Price
|
Number
of shares
|
Remaining
life
|
Exercisable
Number of Shares Remaining
|
|
|
|
|
|
|
$0.40
|
2,000,000
|
1.0
years
|
2,000,000
|
|
$0.75
|
10,000,000
|
1.0
years
|
9,600,000
|
|
$2.00
|
577,500
|
1.5
years
|
577,500
|
|
$2.75
|
5,780,000
|
1.5
years
|
4,030,000
|
|
|
18,357,500
|
|
18,207,500
|
During
the
nine months ended September 30, 2006, 400,000 warrants were exercised
on a
cashless basis resulting in the issuance of 295,806 shares of common
stock and
1,750,000 warrants were exercised at $2.75 per share resulting in the
issuance
of 1,750,00 share of common stock and proceeds of $4,812,500. In
connection with the exercise of the 1,750,000 warrants Calibre issued
additional
warrants to purchase 1,000,000 shares of the Company’s common stock at $1.50 per
share with an expiration of November 5, 2008.
F-43
FINANCIAL
INFORMATION
Unaudited
IMPORTANT
NOTICE:
The
following unaudited Pro Forma financial information of Calibre Energy, Inc.
(“Calibre”) and Hardwood Doors & Milling Specialities, Inc. (“Hardwood”) set
forth a post merger snapshot of the combined balance sheet at December 31,
2005
as though the merger had occurred as of the balance sheet date. Hardwood
had no
significant operations; therefore, no pro forma statement of operations is
presented. The Pro Forma transactions presented are required by the merger
agreement or by accounting principles to be completed upon the completion
of the
reverse acquisition.
Pro
Forma Balance Sheet
December
31, 2005
(unaudited)
|
|
|
CEI
|
Hardwood
|
Adjustments
|
Pro
Forma
Combined
|
|||||||||||||||||
|
Assets
|
Debit
|
Credit
|
||||||||||||||||||||
|
Current
Assets
|
||||||||||||||||||||||
|
Cash
|
$
|
2,105,749
|
$
|
100,872
|
(5
|
)
|
$
|
100,872
|
$
|
2,105,749
|
||||||||||||
|
Accounts
Receivable
|
33,960
|
33,960
|
||||||||||||||||||||
|
Notes
receivable
|
300,000
|
-
-
|
300,000
|
|||||||||||||||||||
|
Other
current assets
|
104,100
|
-
-
|
(4
|
)
|
100,000
|
4,100
|
||||||||||||||||
|
Total
current assets
|
2,543,809
|
100,872
|
200,872
|
2,443,809
|
||||||||||||||||||
|
Noncurrent
Assets
|
||||||||||||||||||||||
|
Oil
and gas properties, using full cost method
|
5,308,881
|
5,308,881
|
||||||||||||||||||||
|
Furniture
and office equipment
|
121,778
|
-
-
|
121,778
|
|||||||||||||||||||
|
Less
accumulated depreciation, depletion, amortization and
impairment
|
(35,599
|
)
|
-
-
|
(35,599
|
)
|
|||||||||||||||||
|
Net
property, furniture and office equipment
|
5,395,060
|
-
-
|
5,395,060
|
|||||||||||||||||||
|
Total
assets
|
7,938,869
|
100,872
|
200,872
|
7,838,869
|
||||||||||||||||||
|
Liabilities
and Shareholders’ Equity
|
||||||||||||||||||||||
|
Current
Liabilities
|
||||||||||||||||||||||
|
Accounts
payable- trade
|
946,852
|
946,852
|
||||||||||||||||||||
|
Accounts
payable- employees
|
98,630
|
98,630
|
||||||||||||||||||||
|
Stock
payable
|
100,000
|
(5)
|
|
100,000
|
-
|
|||||||||||||||||
|
Accrued
expenses
|
20,482
|
12,511
|
(5)
|
|
12,511
|
20,482
|
||||||||||||||||
|
Note
Payable - Stockholder
|
-
-
|
10,000
|
(5)
|
|
10,000
|
-
|
||||||||||||||||
|
Total
liabilities
|
$
|
1,065,964
|
$
|
122,511
|
122,511
|
$
|
1,065,964
|
|||||||||||||||
|
Shareholders’
Equity
|
||||||||||||||||||||||
|
Preferred
stock
|
-
|
-
|
-
|
|||||||||||||||||||
|
Common
stock
|
47,000
|
23,100
|
(2)
|
|
19,575
|
(1
|
)
|
50,525
|
||||||||||||||
|
Additional
paid-in capital
|
8,727,556
|
124,900
|
(1)
|
|
(2
|
)
|
19,575
|
8,702,392
|
||||||||||||||
|
(3)
|
|
169,639
|
||||||||||||||||||||
|
Accumulated
deficit
|
(1,901,651
|
)
|
(169,639
|
)
|
(4)
|
|
100,000
|
(3
|
)
|
169,639
|
(1,980,012
|
)
|
||||||||||
|
(5
|
)
|
21,639
|
||||||||||||||||||||
|
Total
shareholders’ equity
|
6,872,905
|
(21,639
|
)
|
6,772,905
|
||||||||||||||||||
|
Total
liabilities and shareholders’ equity
|
$
|
7,938,869
|
$
|
100,872
|
$
|
411,725
|
$
|
210,853
|
$
|
7,838,869
|
Notes
|
(1)
|
Merger
agreement provides for the cancellation of 19,575,000 shares
of Hardwood
common stock.
|
|
(2)
|
As
a
result of reverse merger accounting, additional paid in capital
of
Hardwood is eliminated.
|
|
(3)
|
As
a
result of the reverse merger accounting, the Hardwood’s accumulated
deficit is eliminated.
|
|
(4)
|
Represents
the cost of the merger to Calibre of $100,000 reflected
in recapitalization
expense.
|
|
(5)
|
Represents
the net liabilities assumed by the principal shareholder of Hardwood
of
$21,639 included in Hardwood’s balance
sheet.
|
F-44
PART
II
Item
13. Other
Expenses of Issuance and Distribution.
The
following table sets forth the costs and expenses, other than the underwriting
discounts and commissions, payable by the registrant in connection with the
sale
of the securities being registered. All amounts are estimates except the
Securities and Exchange Commission registration fee.
|
Securities
and Exchange Commission Registration Fee
|
$
|
22,190.60
|
||
|
Printing
Costs
|
3,000
|
|||
|
Legal
Fees and Expenses
|
60,000
|
|||
|
Accounting
Fees and Expenses
|
15,000
|
|||
|
Transfer
Agent and Registrar Fees
|
3,000
|
|||
|
Miscellaneous
|
10,000
|
|||
|
Total
|
$
|
113,190.60
|
Item
14. Indemnification of Directors and Officers.
Chapter
78
of the Nevada General Corporation Law (“NGCL”) provides that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding whether
civil, criminal, administrative or investigative (other than an action by or
in
the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving
at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys’ fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he is not liable pursuant to NGCL Section 78.138
or acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. NGCL Chapter 78 further provides that a corporation similarly
may
indemnify any such person serving in any such capacity who was or is a party
or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation or is or was serving at the request of the corporation as
a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys’ fees)
actually and reasonably incurred in connection with the defense or settlement
of
such action or suit if he is
II
-
1
not
liable
pursuant to NGCL Section 78.138 or acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of
any
claim, issue or matter as to which such person shall have been adjudged to
be
liable to the corporation unless and only to the extent that the court or other
court of competent jurisdiction in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but
in
view of all of the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the court or other
court of competent jurisdiction shall deem proper.
Article
VII of our Articles of Incorporation provides as follows:
“A
director or officer of the Corporation shall have no personal liability to
the
Corporation or its stockholders for damages for breach of fiduciary duty as
a
director or officer, except for damages for breach of fiduciary duty resulting
from (a) acts or omissions which involve intentional misconduct, fraud, or
a
knowing violation of law, or (b) the payment of dividends in violation of
section 78.300 of the Nevada Revised Statutes as it may from time to time be
amended or any successor provision thereto.”
Article
VIII of our Bylaws provides as follows:
“Section
1. Any person made a party to or involved in any civil, criminal or
administrative action, suit or proceeding by reason of the fact that he or
his
testator or intestate is or was a Director, officer, or employee of the
Corporation, or of any corporation which he, the testator, or intestate served
as such at the request of the Corporation, shall be indemnified by the
Corporation against expenses reasonably incurred by him or imposed on him in
connection with or resulting from the defense of such action, suit, or
proceeding and in connection with or resulting from any appeal thereon, except
with respect to matters as to which it is adjudged in such action, suit or
proceeding that such officer, Director, or employee was liable to the
Corporation, or to such other corporation, for negligence or misconduct in
the
performance of his duty. As used herein the term “expense” shall include all
obligations incurred by such person for the payment of money, including without
limitation attorney’s fees, judgments, awards, fines, penalties, and amounts
paid in satisfaction of judgment or in settlement of any such action, suit,
or
proceedings, except amounts paid to the Corporation or such other corporation
by
him.”
A
judgment
of conviction whether based on plea of guilty or nolo contendere or its
equivalent, or after trial, shall not of itself be deemed an adjudication that
such Director, officer or employee is liable to the Corporation, or such other
corporation, for negligence or misconduct in the performance of his duties.
Determination of the rights of such indemnification and the amount thereof
may
be made at the option of the person to be indemnified pursuant to procedure
set
forth, from time to time, in the By-Laws, or by any of the following procedures:
(a) order of the Court or administrative body or agency having jurisdiction
of
the action, suit, or proceeding; (b) resolution adopted by a majority of the
quorum of the Board of Directors of the Corporation without counting in such
majority any Directors who have incurred expenses in connection with such
action, suit or proceeding; (c) if there is no quorum of Directors who have
not
incurred expense in connection with such action, suit, or proceeding, then
by
resolution adopted by a majority of the committee of stockholders and Directors
who have not incurred such expenses appointed by the Board of Directors; (d)
resolution adopted by a majority of the quorum of the Directors entitled to
vote
at any meeting; or (e) Order of any Court having jurisdiction over the
Corporation. Any such determination that a payment by way of indemnity should
be
made will be binding upon the Corporation. Such right of indemnification shall
not be exclusive of any other right which such Directors, officers, and
employees of the Corporation and the other persons above mentioned may have
or
hereafter acquire, and without limiting the generality of such statement, they
shall be entitled to their respective rights of indemnification under any
By-Law, Agreement, vote of stockholders, provision of law, or otherwise in
addition to their rights under this Article. The provision of this Article
shall
apply to any member of any committee appointed by the Board of Directors as
fully as though each person and been a Director, officer or employee of the
Corporation.”
II
-
2
Additionally,
under their employment agreements with Calibre, Messrs. Tomlinson, Moses,
Pennington and Nunnallee are entitled to indemnification in their capacity
as officers of Calibre to the fullest extent permitted by the
NGCL.
Item
15. Recent Sales of Unregistered Securities.
Acquisition
of Calibre Energy, Inc.
On
January
27, 2006 Calibre Energy, Inc., a Nevada corporation (“Calibre Nevada”), then
named “Hardwood Doors and Milling Specialties, Inc.,” issued: (i) 47,000,000
shares of common stock to the shareholders of Calibre Energy, Inc., a Delaware
corporation (“Calibre Delaware”) in exchange for all the outstanding capital
stock of Calibre Delaware; and (ii) warrants to acquire 10,000,000 shares of
common stock at a price of $0.75 to the shareholders of Calibre Delaware in
exchange for all the outstanding warrants of Calibre Delaware. The shares of
common stock issued in the acquisition were offered and sold pursuant to the
exemption from registration afforded by Rule 506 under the Securities Act of
1933 (the “Securities Act”), Regulations and/or Section 4(2) of the Securities
Act.
In
March
and April of 2006, Calibre Nevada issued 5,780,000 units,
to
investors in the United States and other countries, at a price of $2.75.
Each
unit was composed of one share of its common stock and a warrant to purchase
one
share of Calibre Nevada common stock at a price of $2.00 per share.. At the
same
time,
Calibre
Nevada issued to the placement agents who assisted with the sale of the share
and warrants outside the United States, warrants to purchase 577,500
units;
each
unit was composed of one share of its common stock and a warrant to purchase
one
share of its common stock at a price of $2.00 per share.
The
shares of common stock, warrants and units were offered and sold pursuant
to the
exemption from registration afforded by Rule 506 under the Securities Act,
Regulation S, and/or Section 4(2) of the Securities Act.
On
November 7, 2006 Calibre Nevada completed a private placement offering
of its
common stock and warrants with a single investor. Pursuant to the private
placement, the investor agreed to pay an aggregate of $4,812,500 and
surrender a
warrant it held for the purchase of 1,750,000 shares of common stock
at a price
of $2.75 per share in exchange for 1,000,000 shares of the Company’s common
stock and warrants to purchase 1,000,000 shares of its common stock at
a price
of $1.50 per share; the new warrants expire October 31, 2008. The private
placement was completed under Regulation S. Proceeds of the private placement
will be used for general working capital.
Item
16. Exhibits and Financial Statement Schedules.
| (a) |
Exhibits.
The
following exhibits of Calibre are included
herein.
|
|
Exhibit
No.
|
Description
|
|
2.1
|
Amended
and Restated Agreement and Plan of Reorganization dated January 17,
2006
by and among Hardwood Doors and Milling Specialities, Inc., a Nevada
corporation, Calibre Energy Acquisition Corp., a Delaware corporation,
and
Calibre Energy, Inc., a Delaware corporation, (Incorporated by reference
from Exhibit 3.1 to the Current Report on Form 8-K filed by Calibre
Energy, Inc. on January 27, 2006)
|
|
3.1
|
Amended
and Restated Articles of Incorporation of Hardwood Doors and Milling
Specialties, Inc. (Incorporated by reference to Exhibit 3.1 of Calibre
Energy, Inc.’s Current Report on Form 8-K filed January 27,
2006.)
|
|
3.3
|
Bylaws
of Calibre Energy, Inc. (Incorporated by reference to Exhibit 3.3
of
Calibre Energy, Inc.’s Current Report on Form 8-K filed January 27,
2006.)
|
|
5.1
|
Opinion
of Vinson & Elkins L.L.P.
|
II
-
3
|
10.1
|
Registration
Rights Agreement dated October 31, 2005 by and among Calibre Energy,
Inc.
and the stockholders named therein. (Incorporated by reference to
Exhibit
10.1 of Calibre Energy, Inc.’s Current Report on Form 8-K filed January
27, 2006.)
|
|
10.2
|
Form
of Common Stock Warrant dated October 31, 2005 issued by Calibre
Energy,
Inc. to the purchasers. (Incorporated by reference to Exhibit 10.2
of
Calibre Energy, Inc.’s Current Report on Form 8-K filed January 27,
2006.)
|
|
10.3
|
Participation
Agreement (Southern Fort Worth Basin) dated September 20, 2005 among
Calibre Energy, Inc., Kerogen Resources, Inc. (Incorporated by reference
to Exhibit 10.3 of Calibre Energy, Inc.’s Current Report on Form 8-K filed
January 27, 2006.)
|
|
10.4
|
Letter
Agreement re: Barnett Share Acquisition dated October 12, 2005 between
Reichmann Petroleum and Calibre Energy, Inc. (Incorporated by reference
to
Exhibit 10.4 of Calibre Energy, Inc.’s Current Report on Form 8-K filed
January 27, 2006.)
|
|
10.5
|
Participation
Agreement (Williston Basin) dated September 20, 2005 between Calibre
Energy, Inc. and Kerogen Energy, Inc. (Incorporated by reference
to
Exhibit 10.5 of Calibre Energy, Inc.’s Current Report on Form 8-K filed
January 27, 2006.)
|
|
10.6
|
First
Amendment to Participation Agreements dated October 31, 2005 among
Calibre
Energy, Inc., Kerogen Resources, Inc., Triangle Petroleum USA, Inc.
and
Wynn Crosby Partners I, LP. (Incorporated by reference to Exhibit
10.6 of
Calibre Energy, Inc.’s Current Report on Form 8-K filed January 27,
2006.)
|
|
10.7
|
Calibre
Energy, Inc. 2005 Stock Incentive Plan (Incorporated by reference
to
Exhibit 10.7 of Calibre Energy, Inc.’s Current Report on Form 8-K filed
January 27, 2006.)
|
|
10.8
|
Form
of Incentive Stock Option Agreement (Incorporated by reference to
Exhibit
10.8 of Calibre Energy, Inc.’s Current Report on Form 8-K filed January
27, 2006.)
|
|
10.9
|
Form
of Non-Statutory Stock Option Agreement (Incorporated by reference
to
Exhibit 10.9 of Calibre Energy, Inc.’s Current Report on Form 8-K filed
January 27, 2006.)
|
|
10.10
|
Amended
and Restated Employment Agreement dated October 3, 2006 between Calibre
Energy, Inc. and Tomlinson. (Incorporated by reference to Exhibit
10.1 of
Calibre Energy, Inc.'s Current Report on Form 8-K filed October 4,
2006.
|
|
10.11
|
Amended
and Restated Employment Agreement dated October 3, 2006 between
Calibre Energy, Inc. and Moses. (Incorporated by reference to Exhibit
10.2
of Calibre Energy, Inc.’s Current Report on Form 8-K filed October 4,
2006.)
|
|
10.12
|
Amended
and Restated Employment Agreement dated October 3, 2006 between
Calibre Energy, Inc. and Peter F. Frey (Incorporated by reference
to
Exhibit 10.3 of Calibre Energy, Inc.’s Current Report on Form 8-K filed
October 4, 2006.)
|
|
10.13
|
Amended
and Restated Employment Agreement dated October 3, 2006 between
Calibre Energy, Inc. and O. Oliver Pennington, III (Incorporated
by
reference to Exhibit 10.4 of Calibre Energy, Inc.’s Current Report on Form
8-K filed October 4, 2006.)
|
II
-
4
|
10.14
|
Form
of Stock Purchase Warrant dated April 18, 2006. (Incorporated by
reference
to Exhibit 10.1 of Calibre Energy, Inc.’s Current Report on Form 8-K filed
April 24, 2006.)
|
|
10.15
|
Registration
Rights Agreement dated April 18, 2006. (Incorporated by reference
to
Exhibit 10.1 of Calibre Energy, Inc.’s Current Report on Form 8-K filed
April 24, 2006.)
|
|
10.16
|
Bina Bawi JOA (Incorporated by reference to Exhibit 10.1 of Calibre Energy, Inc.'s Current Report on Form 8-K filed September 18, 2006.) |
|
10.17
|
Bina
Bawi Novation Agreement (Incorporated by reference to Exhibit 10.2
of
Calibre Energy, Inc.'s Current Report on Form 8-K filed September
18,
2006.)
|
|
10.18
|
Calibre Energy, Inc. Agreement with Hawler Energy, Inc. (Incorporated by reference to Exhibit 10.3 of Calibre Energy, Inc.'s Current Report on Form 8-K filed September 18, 2006 |
|
10.19
|
Calibre
Energy, Inc. Agreement of AMI with Hawler Energy, Inc. (Incorporated
by
reference to Exhibit 10.4 of Calibre Energy, Inc.’s Current Report on Form
8-K filed September 18, 2006.
|
|
10.20
|
Form
of Stock Purchase Warrant dated November 6, 2006. (Incorporated by
reference to Exhibit 10.1 of Calibre Energy, Inc.’s Current Report on Form
8-K filed January, 2007.)
|
|
10.21
|
Registration
Rights Agreement dated November 6, 2006. (Incorporated by reference
to Exhibit 10.2 of Calibre Energy, Inc.’s Current Report on Form 8-K filed
January 17, 2007.)
|
|
10.22
|
Business
Opportunity Agreement dated January 16, 2006 between Calibre Energy,
Inc. and Standard Drilling, Inc. (Incorporated by reference to
Exhibit
Calibre Energy, Inc.'s Current Report Form 8- filed January 17,
2007.)
|
|
23.1**
|
Consent
of Malone & Bailey, PC
|
|
23.2
|
Consent
of Vinson & Elkins L.L.P. (included in Exhibit
5.1)
|
|
23.3
|
Consent
of Ryder Scott Company, L.P.
|
**
Filed
herewith
(b) Financial
Statement Schedules.
All
schedules are omitted because they are inapplicable or the requested information
is shown in the consolidated financial statements of the registrant or related
notes thereto.
Item
17. Undertakings.
(a) The
undersigned registrant hereby undertakes:
(1) To
file,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
to:
(i) Include
any
prospectus required by Section 10(a)(3) of the Securities Act of
1933;
(ii) Reflect
in the
prospectus any facts or events arising
after the effective date of the registration statement which,
individually or in
the
aggregate, together,
represent
a
fundamental change in the information set
forth
in the registration statement. Notwithstanding the foregoing, any increase
or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Securities and Exchange
Commission pursuant to Rule424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the
in
the effective
registration statement; and
(iii)
Include any additional or changed material information on the plan of
distribution
II
-
5
(2) That,
for
the purpose of
determining any
liability
under the Securities Act
of
1933, treat each
such
post-effective
amendment as a
new registration statement of to
the
securities offered
therein,
and the
offering of the
securities at that time to
be
the
initial bona fide offering.
(3) To
file
a
post-effective amendment to
remove
from registration any
of the
securities being
registered that
remain
unsold at the end
of the
offering.
(4)
For
determining liability of the undersigned registrant under the Securities
Act to
any purchaser in the initial distribution of the securities, the undersigned
undertakes that in a primary offering of securities of the undersigned
registrant pursuant to this registration statement, regardless of the
underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to
the
purchaser and will be considered to offer or sell such securities to such
purchaser:
(i)
any
preliminary prospectus or prospectus of the undersigned small business
issuer
relating to the offering required to be filed pursuant to Rule 424;
(ii)
any
free writing prospectus relating to the offering prepared by or on behalf
of the
undersigned small business issuer or used or referred to by the undersigned
small business issuer;
(iii)
the
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned Registrant or its securities
provided
by or on behalf of the undersigned registrant; and
(iv)
any
other communication that is an offer in the offering made by the undersigned
registrant or the purchaser.
(b)
The
undersigned registrant hereby undertakes that for the purpose of determining
liability under the Securities Act to any purchaser, if the registrant
is
subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as
part of a
registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance
on
Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. PROVIDED,
HOWEVER, that no statement made in a registration statement or prospectus
that
is part of the registration statement or made in a document incorporated
or
deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with
a time
of contract of sale prior to such first use, supersede or modify any statement
that was made in the registration statement or prospectus that was part
of the
registration statement or made in any such document immediately prior to
such
date of first use.
(c) Insofar
as
indemnification for liabilities arising under the Securities Act of 1933
(the
"Act") may
be
permitted to directors, officers and controlling persons of
the registrant
pursuant to the foregoing provisions, or otherwise, the registrant
has
been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is,
therefore, unenforceable.
(d)
In
the
event that a claim for indemnification against such liabilities (other
than the
payment by the registrant of
expenses incurred or paid by a director, officer or controlling person
of the
registrant in
the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being
registered, the registrant will,
unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of
1933
and
will
be governed by the final adjudication of such issue.
II
-
6
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies
that
it has reasonable grounds to believe that it meets all of the requirements
for
filing on Form SB-2 and has authorized this Registration Statement to be
signed
on its behalf by the undersigned, thereunto duly authorized, in the City
of
Washington, District of Columbia, on the 18th day of January
2007.
|
CALIBRE
ENERGY, INC.
|
||
|
By:
|
/s/
Prentis B. Tomlinson, Jr.
|
|
|
Name:
|
Prentis
B. Tomlinson, Jr.
|
|
|
Title:
|
Chief
Executive Officer
|
|
|
By:
|
/s/
O. Oliver Pennington, III
|
|
|
Name:
|
O.
Oliver Pennington, III
|
|
|
Title:
|
Chief
Financial Officer and
|
|
|
Principal
Accounting Officer
|
||
KNOW
ALL
MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Prentis B. Tomlinson, Jr. his true and lawful
attorney-in-fact and agent, with full power of substitution and revocation,
for
him and in his name, place and stead, in any and all capacities (until revoked
in writing), to sign any and all amendments (including post-effective
amendments) to this Registration Statement and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done as fully for all intents and purposes as
he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or is substitute or substitutes, may lawfully do
or
cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this Registration
Statement has been signed below by the following persons in the capacities
and
on the dates indicated.
|
Signature
|
Title
|
Date
|
|
|
/s/ Prentis
B. Tomlinson, Jr.
|
President,
Chief Executive Officer and
|
January
18, 2007
|
|
|
Prentis
B. Tomlinson, Jr.
|
Chairman
of Board (principal executive officer)
|
||
|
/s/
O.
Oliver Pennington, III
|
Vice
President and Chief Financial Officer
|
January
18, 2007
|
|
|
O.
Oliver Pennington, III
|
(principal
financial and accounting officer)
|
||
|
/s/
Edward
L. Moses, Jr.
|
January
18, 2007
|
||
|
Edward
L. Moses, Jr.
|
Director
|
||
|
/s/
W.
Richard Anderson
|
January
18, 2007
|
||
|
W.
Richard Anderson
|
Director
|
||
| /s/ Derek H. L. Buntain |
January
18, 2007
|
||
| Derek H. L. Buntain | Director | ||
|
/s/Kirwin
L. Drouet
|
January
18, 2007
|
||
| Kirwin L. Drouet | Director | ||
II-7