UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31,
2014
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 000-51712
PARK PLACE ENERGY CORP.
(Exact name of registrant as specified in its charter)
Nevada |
71-0971567 |
(State or other jurisdiction of incorporation or |
(IRS Employer Identification No.) |
organization) |
|
|
|
2200 Ross Ave., Suite 4500E |
|
|
75201 |
Dallas, TX USA |
|
(Address of principal executive offices) |
(Zip Code) |
Registrants telephone number, including area code: (214)
220-4340
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange
Act:
Common Stock, par value $0.00001 per share
(Title of class)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.
[
] Yes [X] No
Indicate by check mark if the registrant is not required to
file reports pursuant to Section 13 or 15(d) of the Exchange Act
[ ] Yes [X] No
Indicate by check mark whether the registrant (1) filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes
[ ] No
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files.
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers
in response to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
Large accelerated filer [ ] |
Accelerated
filer [ ] |
Non-accelerated filer [ ]
(do not
check if a smaller reporting company) |
Smaller reporting company [X]
|
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
[ ]
Yes [X] No
- 2 -
The aggregate market value of the registrants stock held by
non-affiliates of the registrant as of June 30, 2014, computed by reference to
the price at which such stock was last sold on the OTC Bulletin Board ($.23) on
that date, was approximately $8,413,372. For purposes of this computation, all
officers, directors and 10% beneficial owners of the registrant are deemed to be
affiliates. Such determination should not be deemed an admission that such
officers, directors or 10% beneficial owners are, in fact, affiliates of the
registrant.
The registrant had 45,731,482 shares of common stock
outstanding as of March 20, 2015.
PARK PLACE ENERGY CORP.
FORM 10-K
TABLE OF CONTENTS
3
Forward-Looking Statements
Certain statements in this Annual Report on Form 10-K
constitute forward-looking statements within the meaning of applicable U.S.
securities legislation. Additionally, forward-looking statements may be made
orally or in press releases, conferences, reports, on our website or otherwise,
in the future, by us or on our behalf. Such statements are generally
identifiable by the terminology used such as plans, expects, estimates,
budgets, intends, anticipates, believes, projects, indicates,
targets, objective, could, should, may or other similar words.
By their very nature, forward-looking statements require us to
make assumptions that may not materialize or that may not be accurate.
Forward-looking statements are subject to known and unknown risks and
uncertainties and other factors that may cause actual results, levels of
activity and achievements to differ materially from those expressed or implied
by such statements, including the factors discussed under Item 1A. Risk Factors
in this Annual Report on Form 10-K. Such factors include, but are not limited
to, the following: fluctuations in and volatility of the market prices for oil
and natural gas products; the ability to produce and transport oil and natural
gas; the results of exploration and development drilling and related activities;
global economic conditions, particularly in the countries in which we carry on
business, especially economic slowdowns; actions by governmental authorities
including increases in taxes, legislative and regulatory initiatives related to
fracture stimulation activities, changes in environmental and other regulations,
and renegotiations of contracts; political uncertainty, including actions by
insurgent groups or other conflicts; the negotiation and closing of material
contracts; future capital requirements and the availability of financing;
estimates and economic assumptions used in connection with our acquisitions;
risks associated with drilling, operating and decommissioning wells; actions of
third-party co-owners of interests in properties in which we also own an
interest; our ability to effectively integrate companies and properties that we
acquire; our limited operating history; our history of operating losses; our
lack of insurance coverage; and the other factors discussed in other documents
that we file with or furnish to the U.S. Securities and Exchange Commission (the
SEC or the Commission). The impact of any one factor on a particular
forward-looking statement is not determinable with certainty as such factors are
interdependent upon other factors and our course of action would depend upon our
assessment of the future, considering all information then available. In that
regard, any statements as to: future oil or natural gas production levels;
capital expenditures; the allocation of capital expenditures to exploration and
development activities; sources of funding for our capital expenditure programs;
drilling of new wells; demand for oil and natural gas products; expenditures and
allowances relating to environmental matters; dates by which certain areas will
be developed or will come on-stream; expected finding and development costs;
future production rates; ultimate recoverability of reserves, including the
ability to convert probable and possible reserves to proved reserves; dates by
which transactions are expected to close; future cash flows, uses of cash flows,
collectability of receivables and availability of trade credit; expected
operating costs; changes in any of the foregoing and other statements using
forward-looking terminology are forward-looking statements, and there can be no
assurance that the expectations conveyed by such forward-looking statements
will, in fact, be realized.
Although we believe that the expectations conveyed by the
forward-looking statements are reasonable based on information available to us
on the date such forward-looking statements were made, no assurances can be
given as to future results, levels of activity, achievements or financial
condition.
Readers should not place undue reliance on any forward-looking
statement and should recognize that the statements are predictions of future
results that may not occur as anticipated. Actual results could differ
materially from those anticipated in the forward-looking statements and from
historical results due to the risks and uncertainties described above, as well
as others not now anticipated. The foregoing statements are not exclusive and
further information concerning us, including factors that potentially could
materially affect our financial results, may emerge from time to time. We do not
intend to update forward-looking statements to reflect actual results or changes
in factors or assumptions affecting such forward-looking statements.
4
PART I
ITEM
1.
BUSINESS
Name and Organization
We were incorporated under the laws of the State of Nevada on
August 27, 2004 under the name ST Online Corp. and in 2007, changed our name to
Park Place Energy Corp. We have one subsidiary, BG Explorations EOOD, a company
incorporated under the laws of Bulgaria, which is wholly-owned by the Company.
Throughout this Annual Report on Form 10-K, the terms "Park
Place" "we" "us," "the Company", "our" and "our company" refer to Park Place
Energy Corp. and its subsidiary.
General
Park Place Energy Corp. is an energy company engaged in
exploration for oil and natural gas, primarily in the Dobrich region of
northeast Bulgaria. In 2014, we moved our headquarter offices to Dallas, Texas
from Calgary, Alberta, Canada, and established a registered office in Bulgaria.
Our corporate headquarters are located at 2200 Ross Avenue, Suite 4500, Dallas,
Texas 75201.
Today, the operations of our Company and its subsidiary
concentrate on natural gas exploration in the Dobrich region of northeast
Bulgaria. We continue to look for new opportunities in other countries with
particular focus on Eastern Europe. Our goal is to become a producer of natural
gas in Bulgaria and other countries.
Bulgaria License
In 2010, we revamped our business strategy to focus on
obtaining gas properties in Europe. We were attracted to the high price of
natural gas and shortage of supply on the European continent. We also saw the
possibility of prolonged depressed natural gas prices in North America.
In October of 2010, we were awarded an exploration permit for
the Vranino 1-11 Block located in Dobrudja Basin, Bulgaria, by the Bulgarian
Counsel of Ministers. On April 1, 2014, the Company entered into an Agreement
for Crude Oil and Natural Gas Prospecting and Exploration in the Vranino 1-11
Block with the Ministry of Economy and Energy of Bulgaria (the License
Agreement). The initial term of the License Agreement is five years. This
five-year period will commence once the Bulgarian regulatory authorities approve
of the Companys work programs for the permit area. The License Agreement (or
applicable legislation) provides for possible extension periods for up to five
additional years during the exploration phase, as well as the conversion of the
License Agreement to an exploitation concession, which can last up to 35 years.
Under the License Agreement, the Company will submit a yearly work program that
is subject to approval of the Bulgarian regulatory authorities.
The Companys commitment is to perform geological and
geophysical exploration activities in the first 3 years of the initial term (the
Exploration and Geophysical Work Stage), followed by drilling activities in
years 4 and 5 of the initial term (the Data Evaluation and Drilling Stage).
The Company is required to drill 10,000 meters (approximately 32,800 feet) of
new wellbore (which may be vertical, horizontal or diagonal) and conduct other
exploration activities during the initial term.
5
Pursuant to the License Agreement, the Company is obligated to
incur minimum costs during the initial term as follows:
|
(i) |
$925,000 for the Exploration and Geophysical Work Stage;
and |
|
(ii) |
$3,675,000 for the Data Evaluation and Drilling
Stage. |
In addition, during the term of the License Agreement, the
Company is obligated to pay an annual land rental fee of 15,897 BGN (US $8,712
based on the exchange rate of .548 Lev to Dollar as of March 20, 2015).
The Company is permitted to commence limited production during
the initial term of the License Agreement. Upon confirmation of a commercial
discovery, the Company is entitled to convert the productive area of the license
to an exploitation concession that may last for up to 35 years provided that the
minimum work commitments are satisfied.
On August 26, 2014, the Bulgarian environmental agency approved
the Companys overall work program and first year annual work program. A number
of parties appealed the decision of the environmental agency. An appeals
proceeding has been commenced before an administrative judge panel with an
initial hearing scheduled for May 15, 2015. The Company is participating in that
proceeding as an interested party. The initial term of the License Agreement
will not begin until (i) the appeals proceeding has been completed and the
decision upheld, and (ii) the Ministry of Economy and Energy has approved the
Companys overall work program and first year annual work program. The Company
will continue its data gathering, evaluation and planning during this period.
The costs of the exploration plan will vary depending on a variety of factors,
including, inter alia, the market price and availability of services in the
area, taxes, and transportation costs relating to delivering equipment to the
area. We are considering the drilling of horizontal wells as a completion
technique.
We are engaged in identifying the availability of drilling and
other oilfield services in the vicinity of the permit area. We have located
several suitable service providers for drilling and other services that we
intend to engage at the appropriate time. Local companies in Bulgaria will be
used to provide services to the extent feasible. However, the Bulgarian energy
sector is relatively undeveloped; accordingly, the availability of local
services specialized to meet our requirements may be limited. Park Place has
determined that such expertise, services or equipment may be available in
Romania, Turkey or other countries in the vicinity.
Patents and Trademarks
We do not own, either legally or beneficially, any patent or
trademark.
Research and Development Expenditures
We have not incurred any research or development expenditures
since our incorporation.
Government Regulation
Our current or future operations, including exploration and
development activities on our properties, require permits from various
governmental authorities, and such operations are and will be governed by laws
and regulations of the jurisdiction in which we are conducting business, which
at the present time is Bulgaria. These laws and regulations concern exploration,
development, production, exports, taxes, labor laws and standards, occupational
health, waste disposal, toxic substances, land use, environmental protection and
other matters. Compliance with these requirements may prove to be difficult and
expensive. Due to our international operations, we are subject to the following
issues and uncertainties that can affect our operations adversely:
- the risk of expropriation, nationalization, war, revolution, political
instability, border disputes,
6
renegotiation or modification of existing
contracts, and import, export and transportation regulations and tariffs;
- laws of foreign governments affecting our ability to fracture stimulate
oil or natural gas wells, such as the legislation enacted in Bulgaria in
January 2012, discussed in greater detail below;
- the risk of not being able to procure residency and work permits for our
expatriate personnel;
- taxation policies, including royalty and tax increases and retroactive tax
claims;
- exchange controls, currency fluctuations and other uncertainties arising
out of foreign government sovereignty over international operations;
- laws and policies of the United States affecting foreign trade, taxation
and investment;
- the possibility of being subjected 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;
and
- the possibility of restrictions on repatriation of earnings or capital
from foreign countries.
Permits and Licenses. In order to carry out exploration
and development of oil and natural gas interests or to place these interests
into commercial production, we may require certain licenses and permits from
various governmental authorities. There can be no guarantee that we will be able
to obtain all necessary licenses and permits that may be required. In addition,
such licenses and permits are subject to change and there can be no assurances
that any application to renew any existing licenses or permits will be
approved.
Repatriation of Earnings. Currently, there are no
restrictions on the repatriation of earnings or capital to foreign entities from
Bulgaria. However, there can be no assurance that any such restrictions on
repatriation of earnings or capital from the aforementioned countries or any
other country where we may invest will not be imposed in the future.
Environmental. The oil and natural gas industry is
subject to extensive environmental regulations in Bulgaria. Environmental
regulations establish standards respecting health, safety and environmental
matters and place restrictions and prohibitions on emissions of various
substances produced concurrently with oil and natural gas. The regulatory
requirements cover the handling and disposal of drilling and production waste
products and waste created by water and air pollution control procedures. These
regulations may have an impact on the selection of drilling locations and
facilities, potentially resulting in increased capital expenditures. In
addition, environmental legislation may require those wells and production
facilities to be abandoned and sites reclaimed to the satisfaction of local
authorities. Such regulation has increased the cost of planning, designing,
drilling, operating and, in some instances, abandoning wells. We are committed
to complying with environmental and operation legislation wherever we
operate.
There has been a recent surge in interest among the media,
government regulators and private citizens concerning the possible negative
environmental and geological effects of fracture stimulation. Some have alleged
that fracture stimulation results in the contamination of aquifers and may even
contribute to seismic activity. In January 2012, the government of Bulgaria
enacted legislation that banned the fracture stimulation of oil and natural gas
wells in Bulgaria and imposed large monetary penalties on companies that violate
that ban. Such legislation or regulations could impact our ability to drill and
complete wells, and could increase the cost of planning, designing, drilling,
completing and operating wells. We are committed to complying with legislation
and regulations involving fracture stimulation wherever we operate.
7
Such laws and regulations not only expose us to liability for
our own negligence, but may also expose us to liability for the conduct of
others or for our actions that were in compliance with all applicable laws at
the time those actions were taken. We may incur significant costs as a result of
environmental accidents, such as oil spills, natural gas leaks, ruptures, or
discharges of hazardous materials into the environment, including clean-up costs
and fines or penalties. Additionally, we may incur significant costs in order to
comply with environmental laws and regulations and may be forced to pay fines or
penalties if we do not comply.
Competition
We operate in Bulgaria, where currently one company, Gazprom,
supplies Bulgaria with virtually all natural gas being marketed and consumed in
Bulgaria through a pipeline that runs through Ukraine from Russia. On a regional
level, we compete for license blocks and capital with other oil and gas
exploration companies and independent producers who are actively seeking oil and
natural gas properties throughout the world.
The principal area of competition is encountered in the
financial ability of our Company to acquire acreage positions and drill wells to
explore for oil and natural gas, then, if warranted, install production
equipment. Competition for the acquisition of oil and gas license areas is high
in Europe. Therefore, we may or may not be successful in acquiring additional
blocks in the face of this competition. Presently, we are not seeking additional
license blocks.
From a general standpoint, we operate in the highly competitive
areas of oil and natural gas exploration, development, production and
acquisition with a substantial number of other companies, including U.S.-based
and international companies doing business in each of the countries in which we
operate. We face intense competition from independent, technology-driven
companies as well as from both major and other independent oil and natural gas
companies in each of the following areas:
-
seeking oil and natural gas exploration licenses and production licenses
and leases;
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acquiring desirable producing properties or new leases for future
exploration;
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marketing oil and natural gas production;
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integrating new technologies; and
-
contracting for drilling services and equipment and securing the expertise
necessary to develop and operate properties.
Many of our competitors have substantially greater financial,
managerial, technological and other resources than we do. To the extent
competitors are able to pay more for properties than we are paying, we will be
at a competitive disadvantage. Further, many of our competitors enjoy
technological advantages over us and may be able to implement new technologies
more rapidly than we can. Our ability to explore for and produce oil and natural
gas prospects and to acquire additional properties in the future will depend
upon our ability to successfully conduct operations, implement advanced
technologies, evaluate and select suitable properties and consummate
transactions in this highly competitive environment.
Employees and Directors
As of December 31, 2014, the Company has no employees, and all
of the executive officers of Company work on a consulting basis. As of December
31, 2014, our business is generally conducted through our officers and directors and also through consultants of the Company. The
following is a description of our officers and directors professional
experience in the oil and gas industry:
8
Scott C. Larsen - President and Chief Executive Officer,
Director
Scott C. Larsen is an experienced oil and gas executive who,
from 2004 until June 2010, served as the president and chief executive officer
of TransAtlantic Petroleum Corp., which has significant oil and gas exploration
activities in Europe, including Bulgaria. Mr. Larsen has had extensive
experience in the acquisition and assimilation of oil and gas assets and
companies and early stage development of oil and gas exploration companies.
After completing his law degree at Rutgers University in 1979, Mr. Larsen served
as General Counsel, Chief of Staff and Partner of several oil and gas companies.
Then, in 1994, Mr. Larsen joined the management team at TransAtlantic, which,
over the years, had operations in Nigeria, Benin, Egypt and other North African
countries. Once he became President of TransAtlantic, Mr. Larsen was responsible
for a number of critical strategic actions for that company: he opened four
overseas offices and established acreage positions in Morocco, Romania, Turkey
and the UK North Sea; he sold the offshore Nigeria producing property interest
and eventually sold all U.S. properties; and was instrumental in attracting
significant investment into TransAtlantic. Mr. Larsen served as Vice President
of Business Development of TransAtlantic from 2010 until his retirement in 2012.
Subsequently, Mr. Larsen has served as a consultant to several oil and gas
companies, including the Company. Mr. Larsen became involved with the Company
initially as a consultant in 2013 to help resolve the legal dispute over the
award of the Bulgarian exploration permit. On October 29, 2013, he was elected a
director of the Company and on November 1, 2013 he was appointed its President
and Chief Executive Officer.
Dr. David S. Campbell - Vice President of Exploration
Dr. David Campbell has over 30 years experience in the
petroleum exploration and production business and has worked in a wide variety
of petroleum basins, including the North Sea, Continental Europe, North Africa
and the Middle East. He received a Bachelor of Science degree in geology from
St. Andrews University and a Ph.D. degree in geology from Glasgow University.
After graduation in 1979, he joined Esso Expro UK as a seismic interpreter and
later spent the majority of his professional career with ARCO, both in the UK
and overseas. He was North Sea Chief Geophysicist for ARCO British Limited,
Geophysical Research Manager for ARCO Exploration and Production Technology
Company, and Middle East Exploration Manager for ARCO International Oil and Gas
Company. David was awarded ARCOs International Exploration Award in 1993 and
1994 for his contribution to discoveries in the North Sea and Middle East.
Following his retirement from ARCO in 2000, David was an officer or director in
a number of energy-related companies, including Balli Resources Limited,
TransAtlantic North Sea Ltd. and VND Energy 2008 Limited.
Charles (Chas) Michel - Chief Financial Officer
Mr. Michel has over 35 years experience in all aspects of
finance, accounting and administration in both private and public companies. Mr.
Michel holds a BBA from Texas Tech University. He began his career at KPMG in
Dallas in 1976 where he was an audit partner from June 1986 to April 1992. Mr.
Michel served as Chief Financial Officer of Sfuzzi, Inc. from April 1992 to
September 1994 and Dave & Busters, Inc. from October 1994 to November 2001
and was responsible for financial reporting and financing of operations and
strategic development. He was Vice President, Chief Accounting Officer and
Controller of Trinity Industries, Inc. from December 2001 to April 2009, where
he was responsible for all accounting operations and financial reporting. He has
been a partner at SeatonHill Partners, LLC since October 2009. SeatonHill
Partners, LLC provides professional services to companies on a part-time,
interim or project capacity basis. On September 15, 2014, Mr. Michel was
appointed Chief Financial Officer of the Company.
9
William J. (Bill) McFie Consulting Engineer
With over 40 years of oilfield experience as a petroleum
engineer, Mr. McFie has amassed a wealth of experience, both onshore and
offshore, with respect to the planning and engineering aspects of exploration.
With a Bachelor of Science degree, in chemical engineering from Strathclyde
University, Scotland, Mr. McFie began as a petroleum engineer with Amoco, and
spent a large portion of his career with Sun International, where he served as
international operations manager with postings in Aberdeen, Gabon, London and
Argentina. Mr. McFie subsequently served as country manager in Pakistan (for
Premier), Namibia (for Ranger Oil) and Yemen (for Nimir Petroleum Services). Mr.
McFie then established a U.S. based affiliate for a UK petroleum consulting
firm, which endeavor included a 2 year engagement planning operations in Romania
and Morocco (for TransAtlantic Petroleum). For the 3 years prior to joining Park
Place, Mr. McFie served as operations manager for coal bed methane and
conventional fields in the San Juan Basin and Texas (for Red Willow Production
Company).
Francis M. Munchinski Secretary and Treasurer
Mr. Munchinski is an attorney who has been involved in the oil
and gas business for more than 30 years. He spent 20 years in private practice,
primarily with the law firm of Jenkens & Gilchrist (1986-1998, 2001-2007)
and then with Cox Smith (2007-2009), where he specialized in oil and gas law. He
served as general counsel for Alliance Resources Plc from 1998 to 2001. In
February 2009, he became senior counsel with Denbury Resources Inc. From
November 2012 until joining Park Place as its Secretary in November 2013, Mr.
Munchinski has worked as an attorney in private practice and as a consultant.
Mr. Munchinski received his law degree from the University of Tulsa in 1985. On
September 15, 2014, Mr. Munchinski was appointed Treasurer of the Company.
Dr. Art Halleran - Director
Dr. Halleran has been a director since October 4, 2011. Dr.
Halleran has a Ph.D. in Geology from the University of Calgary, and has 33 years
of international petroleum exploration experience. His international experience
includes work in countries such as Canada, Colombia, Egypt, India, Guinea,
Sierra Leone, Sudan, Suriname, Chile, Brazil, Pakistan, Peru, Tunisia, Trinidad
Tobago, Argentina, Ecuador and Guyana. Dr. Halleran's experience includes work
with Petro-Canada, Chevron, Rally Energy, Canacol Energy, United Hunter Oil and
Gas Corp. and United Hydrocarbon International Corp. In 2007, Dr. Halleran
founded Canacol Energy Ltd., a company with petroleum and natural gas
exploration and development activities in Colombia, Brazil and Guyana, where he
served as vice president of exploration. Previously, Dr. Halleran was a
consulting geologist for Rally Energy Corp. (Egypt), which discovered prolific
reservoirs in Egypt. Dr. Halleran currently serves as Vice President of
Exploration & Development for United Hydrocarbon International Corp., a
company with oil interests in Chad, Africa. Dr. Halleran was appointed as a
director of the Company to provide technical expertise and oversight to the
Dobrudja Basin gas project in Bulgaria. His education and technical experience
in the energy sector are valuable to our Company.
Ijaz Khan - Director
Ijaz Khan holds a law degree from Seattle University School of
Law. He formerly practiced corporate law with the Law Firm of Mussehl and Khan.
He currently serves as Vice President, Special Projects for United Hydrocarbon
International Corp. Previously, he was the General Counsel for the Kuwait Gulf
Oil Company, a subsidiary of Kuwaits State Oil Company, Kuwait Petroleum
Company. There Mr. Khan was in charge of the team advising on the merger of all
the upstream subsidiaries of the Kuwait Petroleum Company and was responsible
for negotiating the terms of a master agreement with Saudi Arabia Chevron
regarding the shared concession in the Divided Zone between Kuwait and Saudi
Arabia. Mr. Khan brings extensive international experience in the oil and gas
industry to the Board.
10
David M. Thompson Director
Mr. Thompson has 30 years of financial experience in the oil
and gas industry. He successfully founded an oil trading company in Bermuda with
offices in the U.S. and Europe (Geneva, Moscow and Amsterdam). He was
responsible for that companys production operations in Turkmenistan and
successfully raised over $100 million in equity. Mr. Thompson also negotiated
the farm-out of a number of company assets. Mr. Thompson is Managing Director of
AMS Limited, a Bermuda based Management Company. In the past he served as
Founder, President and CEO of Sea Dragon Energy Inc. (TSX:V), Chief Financial
Officer of Aurado Energy, Chief Financial Officer of Forum Energy Corporation
(OTC), Financial Director of Forum Energy Plc (AIM) and Senior Vice President at
Larmag Group of Companies. Mr. Thompson is a Certified Management Accountant
(1998). He currently also serves as a Director of United Hydrocarbon
International Corp.
Where You Can Find More Information
Statements contained in this Annual Report as to the contents
of any contract, agreement or other document referred to include those terms of
such documents that we believe are material. Whenever a reference is made in
this Annual Report to any contract or other document of ours, you should refer
to the exhibits that are a part of the Annual Report for a copy of the contract
or document.
You may read and copy all or any portion of the Annual Report
or any other information that we file at the SECs public reference room at 100
F Street, NE, Washington, DC 20549. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
room. Our SEC filings, including the Annual Report, are also available to you on
the SECs website at www.sec.gov.
Our Website
Our website can be found at www.parkplaceenergy.com. Our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K and amendments to those reports filed with or furnished to the U.S.
Securities and Exchange Commission ("SEC"), pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 ("Exchange Act"), can be accessed free of
charge by linking directly from our website under the "Investor Relations - SEC
Filings" caption to the SEC's Edgar Database.
ITEM
1A. RISK
FACTORS
Risks Related to Our Business and the Oil and Gas Industry
We have a history of losses and may not achieve
consistent profitability in the future.
We have incurred losses in prior years. We will need to
generate and sustain increased revenue levels in future periods in order to
become consistently profitable, and even if we do, we may not be able to
maintain or increase our level of profitability. We may incur losses in the
future for a number of reasons, including risks described herein, unforeseen
expenses, difficulties, complications and delays, and other unknown risks.
Our exploration, development and production activities
may not be profitable or achieve our expected returns. The future
performance of our business will depend upon our ability to develop oil and
natural gas reserves from our Bulgarian license that are economically
recoverable. Success will depend upon our ability to develop prospects from our
Bulgarian license from which oil and natural gas reserves are ultimately
discovered in commercial quantities. Without successful exploration activities,
we will not be able to develop oil and natural gas reserves or generate
revenues. There are no assurances that oil and natural gas reserves will be
discovered in sufficient quantities from our Bulgarian license to enable us to
recover our exploration and development costs or sustain our business.
11
The successful development of oil and natural gas properties
requires an assessment of recoverable reserves, future oil and natural gas
prices and operating costs, potential environmental and other liabilities, and
other factors. Such assessments are inherently uncertain. In addition, no
assurance can be given that our exploration and development activities will
result in the discovery of reserves. Operations may be curtailed, delayed or
canceled as a result of lack of adequate capital and other factors, such as lack
of availability of rigs and other equipment, title problems, weather, compliance
with governmental regulations or price controls, mechanical difficulties, or
unusual or unexpected formations, pressures and/or work interruptions. In
addition, the costs of exploration and development may materially exceed our
internal estimates.
We may be unable to acquire or develop additional
reserves, which would reduce our cash flow and income. In general,
production from oil and natural gas properties declines over time as reserves
are depleted, with the rate of decline depending on reservoir characteristics.
If we are not successful in our exploration and development activities or in
acquiring properties containing reserves, our reserves will generally decline as
reserves are produced. Our oil and natural gas production will be highly
dependent upon our ability to economically find, develop or acquire reserves in
commercial quantities.
Our future oil and natural gas reserves, production, and cash
flows, if any, are highly dependent upon us successfully exploiting known gas
resources and proving reserves. A future increase in our reserves will depend
not only on our ability to flow economic rates of natural gas and potentially
develop the reserves we may have from time to time, but also on our ability to
select and acquire suitable producing properties or prospects and technologies
for exploitation. There are no absolute guarantees that our future efforts will
result in the economic development of natural gas.
To the extent cash flow from operations is reduced, either by a
decrease in prevailing prices for oil and natural gas or an increase in finding
and development costs, and external sources of capital become limited or
unavailable, our ability to make the necessary capital investment to maintain or
expand our asset base of oil and natural gas reserves would be impaired. Even
with sufficient available capital, our future exploration and development
activities may not result in additional reserves, and we might not be able to
drill productive wells at acceptable costs.
The development of prospective resources is uncertain. In
addition, there are no assurances that our resources will be converted to proved
reserves.
At December 31, 2014, all of our Bulgarian oil and gas
resources are classified as prospective resources. There is significant
uncertainty attached to prospective resource estimates. The discovery,
determination and exploitation of such resources require significant capital
expenditures and successful drilling and exploration programs. We may not be
able to raise the additional capital that we need to develop these resources.
There is no certainty that we will be able to convert prospective resources into
proved reserves or that these resources will be economically viable or
technically feasible to produce.
The establishment of proved reserves is subjective and
subject to many uncertainties.
In general, estimates of recoverable natural resources are
based upon a number of factors and assumptions made as of the date on which the
resource estimates were determined, such as geological and engineering
estimates, which have inherent uncertainties, and the assumed effects of
regulation by governmental agencies and estimates of future commodity prices and
operating costs, all of which may vary considerably from actual results. All
such estimates are, to some degree, uncertain and classifications of resources
are only attempts to define the degree of uncertainty involved. For these
reasons, estimates of the recoverable natural resources, the classification of
such resources based on risk of recovery, prepared by different engineers or by
the same engineers at different times, may vary substantially.
12
We could lose permits or licenses on certain of our
properties unless the permits or licenses are extended or we commence production
and convert the permits or licenses to production leases or concessions.
Initially, our Bulgarian property will be held in the form of a
license agreement. Future properties may be held in the form of permits, leases
and/or license agreements that contain expiration dates and specific
requirements and stipulations. If our permits or licenses expire, we will lose
our right to explore and develop the related properties. If we fail to meet
specific requirements of the permits, leases and/or license agreements, we may
be in breach and may lose our rights or be liable for damages. Our drilling
plans for these areas are subject to change based upon various factors,
including factors that are beyond our control. Such factors include drilling
results, oil and natural gas prices, the availability and cost of capital,
drilling and production costs, availability of drilling services and equipment,
gathering system and pipeline transportation constraints, and regulatory
approvals.
Currently, all of our operations will be conducted in
Bulgaria, and we are subject to political, economic and other risks and
uncertainties in this country.
Currently, all of our international operations will be
performed in the emerging market of Bulgaria, which may expose us to greater
risks than those associated with more developed markets. Due to our foreign
operations, we are subject to the following issues and uncertainties that can
adversely affect our operations in Bulgaria or other countries in which we may
operate properties in the future:
|
the risk of, and disruptions due to, expropriation,
nationalization, war, revolution, election outcomes, economic instability,
political instability, or border disputes; |
|
|
|
the uncertainty of local contractual terms, renegotiation
or modification of existing contracts and enforcement of contractual terms
in disputes before local courts; |
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the risk of import, export and transportation regulations
and tariffs, including boycotts and embargoes; |
|
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the risk of not being able to procure residency and work
permits for our expatriate personnel; |
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|
the requirements or regulations imposed by local
governments upon local suppliers or subcontractors, or being imposed in an
unexpected and rapid manner; |
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|
|
taxation and revenue policies, including royalty and tax
increases, retroactive tax claims and the imposition of unexpected taxes
or other payments on revenues; |
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exchange controls, currency fluctuations and other
uncertainties arising out of foreign government sovereignty over foreign
operations; |
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|
laws and policies of the United States and of the other
countries in which we may operate affecting foreign trade, taxation and
investment, including anti- bribery and anti-corruption laws; |
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|
the possibility of being subjected 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; and |
13
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the possibility of restrictions
on repatriation of earnings or capital from foreign countries.
|
There can be no assurance that changes in conditions or
regulations in the future will not affect our profitability or ability to
operate in such markets.
The Company will comply with regulations adopted in
Bulgaria banning fracture stimulation activities, and the inability to conduct
such activities in other countries in which we may operate in the future could
result in increased costs and additional operating restrictions or
delays.
Fracture stimulation is a commonly used process for the
completion of oil and natural gas wells and involves the pressurized injection
of water, sand and chemicals into rock formations to stimulate production.
Recently, there has been increased public concern regarding the potential
environmental impact of fracture stimulation activities. Bulgaria has adopted
regulations banning all fracture stimulation activities in Bulgaria.
Consequently, the Company will not conduct such activities in Bulgaria. The
increased attention regarding this process could lead to additional levels of
regulation in other countries in which we may operate in the future. The
inability of the Company to conduct such activities could cause operational
restrictions or delays, or could increase our costs of compliance and doing
business. To the extent that our future operations in countries other than
Bulgaria will rely on fracture stimulation, the adoption of regulations in such
other countries restricting fracture stimulation could impose operational
delays, increased operations costs and additional related burdens on our
exploration and production activities and could suspend or make it more
difficult to perform fracture stimulation, cause a material decrease in the
drilling of new wells and related completion activities and increase our costs
of compliance and doing business, which could materially impact our business and
profitability.
We are subject to foreign currency risks.
Oil and gas operations in Bulgaria will generate revenues in
Leva, while expenses will be incurred in Leva, U.S. dollars or Euros. Gas
production in Bulgaria will generate Leva or Euros. As a result, any
fluctuations of these currencies may result in a change in reported revenues, if
any, that our projects could generate if they commence production. Accordingly,
our future financial results are subject to risk based on changes to foreign
currency rates.
If we lose the services of our management and key
consultants, then our plan of operations may be delayed.
Our success depends to a significant extent upon the continued
service of our executive management, directors and consultants. Losing the
services of one or more key individuals could have a material adverse effect on
the Companys prospective business until replacements are found.
Drilling for and producing oil and natural gas are
high-risk activities with many uncertainties that could adversely affect our
business, financial condition or results of operations.
Our future success depends on the success of our exploration,
development and production activities in our prospects. These activities will be
subject to numerous risks beyond our control, including the risk that we will be
unable to economically produce our reserves or be able to find commercially
productive oil or natural gas reservoirs. Our decisions to purchase, explore,
develop or otherwise exploit prospects or properties will depend in part on the
evaluation of data obtained through geophysical and geological analyses,
production data and engineering studies, the results of which are often
inconclusive or subject to varying interpretations. The cost of drilling,
completing and operating wells is often uncertain before drilling commences.
Overruns in budgeted expenditures are common risks that can make a particular
project unprofitable. Further, many factors may curtail, delay or prevent
drilling operations, including:
- unexpected drilling conditions;
14
-
pressure or irregularities in geological formations;
-
equipment failures or accidents;
-
pipeline and processing interruptions or unavailability;
-
title problems;
-
adverse weather conditions;
-
lack of market demand for oil and natural gas;
-
delays imposed by, or resulting from, compliance with environmental laws
and other regulatory requirements;
-
declines in oil and natural gas prices; and
-
shortages or delays in the availability of drilling rigs, equipment and
qualified personnel.
Our future drilling activities might not be successful, and
drilling success rates overall or within a particular area could decline. We
could incur losses by drilling unproductive wells. Shut-in wells, curtailed
production and other production interruptions may materially adversely affect
our business, financial condition and results of operations.
Shortages of drilling rigs, equipment, oilfield services
and qualified personnel could delay our exploration and development activities
and increase the prices that we pay to obtain such drilling rigs, equipment,
oilfield services and personnel.
Our industry is cyclical and, from time to time, there may be a
shortage of drilling rigs, equipment, oilfield services and qualified personnel
in Bulgaria and other countries in which we may operate in the future. Shortages
of drilling and workover rigs, pipe and other equipment may occur as demand for
drilling rigs and equipment increases, along with increases in the number of
wells being drilled. These factors can also cause significant increases in costs
for equipment, oilfield services and qualified personnel. Higher oil and natural
gas prices generally stimulate demand and result in increased prices for
drilling and workover rigs, crews and associated supplies, equipment and
services. It is beyond our control and ability to predict whether these
conditions will exist in the future and, if so, what their timing and duration
will be. These types of shortages or price increases could significantly
increase our costs, decrease our cash provided by operating activities, or
restrict our ability to conduct the exploration and development activities that
we currently have planned and budgeted or that we may plan in the future. In
addition, the availability of drilling rigs can vary significantly from region
to region at any particular time. An undersupply of drilling rigs in any of the
regions in which we may operate may result in drilling delays and higher costs
for drilling rigs.
A substantial or extended decline in oil and natural gas
prices may adversely affect our ability to meet our future capital expenditure
obligations and financial commitments.
Revenues, operating results and future rate of growth are
substantially dependent upon the prevailing prices of, and demand for, oil and
natural gas. Lower oil and natural gas prices may also reduce the amount of oil
and natural gas that we will be able to produce economically. Historically, oil
and natural gas prices and markets have been volatile, and they are likely to
continue to be volatile in the future. The recent decline in oil prices has
highlighted the volatility and if oil prices remain at this level for an
extended period of time, such lower prices could adversely affect our business,
financial condition and results of operations.
15
A decrease in oil or natural gas prices will not only reduce
revenues and profits, but will also reduce the quantities of reserves that are
commercially recoverable and may result in charges to earnings for impairment of
the value of these assets. If oil or natural gas prices decline significantly
for extended periods of time in the future, we might not be able to generate
sufficient cash flow from operations to meet our obligations and make planned
capital expenditures. Oil and natural gas prices are subject to wide
fluctuations in response to relatively minor changes in the supply of, and
demand for, oil and natural gas, market uncertainty and a variety of additional
factors that are beyond our control. Among the factors that could cause
fluctuations are:
-
market expectations regarding supply and demand for oil and natural gas;
-
levels of production and other activities of the Organization of Petroleum
Exporting Countries and other oil and natural gas producing nations;
-
market expectations about future prices for oil and natural gas;
-
the level of global oil and natural gas exploration, production activity
and inventories;
-
political conditions, including embargoes, in or affecting oil and natural
gas production activities; and
-
the price and availability of alternative fuels.
Lower oil and natural gas prices may not only decrease our
revenues on a per unit basis, but also may reduce the amount of oil and natural
gas that we will be able to produce economically. A substantial or extended
decline in oil or natural gas prices may have a material adverse effect on our
business, financial condition and results of operations.
We are subject to operating hazards.
The oil and natural gas exploration and production business
involves a variety of operating risks, including the risk of fire, explosion,
blowout, pipe failure, casing collapse, stuck tools, uncontrollable flows of oil
or natural gas, abnormally pressured formations and environmental hazards such
as oil spills, surface cratering, natural gas leaks, pipeline ruptures,
discharges of toxic gases, underground migration, surface spills, mishandling of
fracture stimulation fluids, including chemical additives, and natural
disasters. The occurrence of any of these events could result in substantial
losses to us due to injury and loss of life, loss of or damage to well bores
and/or drilling or production equipment, costs of overcoming downhole problems,
severe damage to and destruction of property, natural resources and equipment,
pollution and other environmental damage, clean-up responsibilities, regulatory
investigation and penalties and suspension of operations. Gathering systems and
processing facilities are subject to many of the same hazards and any
significant problems related to those facilities could adversely affect our
ability to market our production.
Our oil and natural gas operations are subject to
extensive and complex laws and government regulation, and compliance with
existing and future laws may increase our costs or impair our
operations.
Our oil and natural gas operations in Bulgaria and other
countries in which we may operate in the future will be subject to numerous laws
and regulations, including those related to the environment, employment,
immigration, labor, oil and natural gas exploration and development, payments to
local, foreign and provincial officials, taxes and the repatriation of foreign
earnings. If we fail to adhere to any applicable laws or regulations, or if such
laws or regulations restrict exploration or production, or negatively affect the
sale, of oil and natural gas, our business, prospects, results of operations,
financial condition or cash flows may be impaired. We may be subject to
governmental sanctions, such as fines or penalties, as well as potential
liability for personal injury, property or natural resource damage and might be required to make
significant capital expenditures to comply with federal, state or international
laws or regulations. In addition, existing laws or regulations, as currently
interpreted or reinterpreted in the future, or future laws or regulations, could
adversely affect our business or operations, or substantially increase our costs
and associated liabilities.
16
In addition, exploration for, and exploitation, production and
sale of, oil and natural gas in Bulgaria and other countries in which we may
operate in the future are subject to extensive national and local laws and
regulations requiring various licenses, permits and approvals from various
governmental agencies. If these licenses or permits are not issued or
unfavorable restrictions or conditions are imposed on our exploration or
drilling activities, we might not be able to conduct our operations as planned.
Alternatively, failure to comply with these laws and regulations, including the
requirements of any licenses or permits, might result in the suspension or
termination of operations and subject us to penalties. Our costs to comply with
such laws, regulations, licenses and permits are significant.
Specifically, our oil and natural gas operations in Bulgaria
and other countries in which we may operate in the future will be subject to
stringent laws and regulations relating to the release or disposal of materials
into the environment or otherwise relating to environmental protection. Failure
to comply with these laws and regulations may result in the imposition of
administrative, civil and/or criminal penalties, incurring investigatory or
remedial obligations and the imposition of injunctive relief.
Changes in environmental laws and regulations occur frequently,
and any changes that result in more stringent or costly waste handling, storage,
transport, disposal or cleanup requirements could require us to make significant
expenditures to attain and maintain compliance and may otherwise have a material
adverse effect on our industry in general and on our own results of operations,
competitive position or financial condition. Although we intend to comply in all
material respects with applicable environmental laws and regulations, there can
be no assurance that we will be able to comply with existing or new regulations.
In addition, the risk of accidental spills, leakages or other circumstances
could expose us to extensive liability. We are unable to predict the effect of
additional environmental laws and regulations that may be adopted in the future,
including whether any such laws or regulations would materially adversely
increase our cost of doing business or affect operations in any area.
Under certain environmental laws that impose strict, joint and
several liability, we may be required to remediate our contaminated properties
regardless of whether such contamination resulted from the conduct of others or
from consequences of our own actions that were or were not in compliance with
all applicable laws at the time those actions were taken. In addition, claims
for damages to persons or property may result from environmental and other
impacts of our operations. Moreover, new or modified environmental, health or
safety laws, regulations or enforcement policies could be more stringent and
impose unforeseen liabilities or significantly increase compliance costs.
Therefore, the costs to comply with environmental, health or safety laws or
regulations or the liabilities incurred in connection with them could
significantly and adversely affect our business, financial condition or results
of operations.
In addition, many countries have agreed to regulate emissions
of greenhouse gases. Methane, a primary component of natural gas, and carbon
dioxide, a byproduct of burning of oil and natural gas, are greenhouse gases.
Regulation of greenhouse gases could adversely impact some of our operations and
demand for some of our services or products in the future.
Competition in the oil and natural gas industry is
intense, and many of our competitors have greater financial, technological and
other resources than we do, which may adversely affect our ability to
compete.
We will be operating in the highly competitive areas of oil and
natural gas exploration, development, production and acquisition with a
substantial number of other companies, both foreign and domestic. We face
intense competition from independent, technology-driven companies as well as
from both major and other independent oil and natural gas companies in each of
the following areas:
17
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seeking oil and natural gas exploration licenses and production licenses;
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acquiring desirable producing properties or new leases for future
exploration;
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marketing oil and natural gas production;
-
integrating new technologies; and
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contracting for drilling services and equipment and securing the expertise
necessary to develop and operate properties.
Many of our competitors have substantially greater financial,
managerial, technological and other resources than we do. These companies are
able to pay more for exploratory prospects and productive oil and natural gas
properties than we can. To the extent competitors are able to pay more for
properties than we are paying, we will be at a competitive disadvantage.
Further, many of our competitors enjoy technological advantages over us and may
be able to implement new technologies more rapidly than we can. Our ability to
explore for and produce oil and natural gas prospects and to acquire additional
properties in the future will depend upon our ability to successfully conduct
operations, implement advanced technologies, evaluate and select suitable
properties and consummate transactions in this highly competitive environment.
We might not be able to obtain necessary permits,
approvals or agreements from one or more government agencies, surface owners, or
other third parties, which could hamper our exploration, development or
production activities.
There are numerous permits, approvals, and agreements with
third parties that will be necessary in order to enable us to proceed with our
exploration, development or production activities and otherwise accomplish our
objectives. The government agencies in Bulgaria and other international
countries have discretion in interpreting various laws, regulations, and
policies governing operations under licenses such as the license we are
obtaining in Bulgaria. Further, we may be required to enter into agreements with
private surface owners to obtain access to, and agreements for, the location of
surface facilities. In addition, because many of the laws governing oil and
natural gas operations in Bulgaria and other international countries have been
enacted relatively recently, there is only a relatively short history of the
government agencies handling and interpreting those laws, including the various
regulations and policies relating to those laws. This short history does not
provide extensive precedents or the level of certainty that allows us to predict
whether such agencies will act favorably toward us. The governments have broad
discretion to interpret requirements for the issuance of drilling permits. Our
inability to meet any such requirements could have a material adverse effect on
our exploration, development or production activities.
Risks Related to Our Common Stock
The value of our common stock may be affected by matters
not related to our own operating performance.
The value of our common stock may be affected by matters that
are not related to our operating performance and are outside of our control.
These matters include the following:
-
general economic conditions in the United States, Bulgaria and globally;
-
industry conditions, including fluctuations in the price of oil and natural
gas;
-
governmental regulation of the oil and natural gas industry, including
environmental regulation and regulation of fracture stimulation activities;
18
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fluctuation in foreign exchange or interest rates;
-
liabilities inherent in oil and natural gas operations;
-
geological, technical, drilling and processing problems;
-
unanticipated operating events that can reduce production or cause
production to be shut in or delayed;
-
failure to obtain industry partner and other third-party consents and
approvals, when required;
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stock market volatility and market valuations;
-
competition for, among other things, capital, acquisition of reserves,
undeveloped land and skilled personnel;
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the need to obtain required approvals from regulatory authorities;
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worldwide supplies and prices of, and demand for, oil and natural gas;
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political conditions and developments in each of the countries in which we
operate;
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political conditions in oil and natural gas producing regions;
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revenue and operating results failing to meet expectations in any
particular period;
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investor perception of the oil and natural gas industry;
-
limited trading volume of our common shares;
-
announcements relating to our business or the business of our competitors;
-
the sale of assets;
-
our liquidity; and
-
our ability to raise additional funds.
In the past, some companies that have experienced volatility in
the trading price of their common stock have been the subject of securities
class action litigation. We might become involved in securities class action
litigation in the future. Such litigation often results in substantial costs and
diversion of managements attention and resources and could have a material
adverse effect on our business, financial condition and results of operation.
Investment in our common stock is speculative due to the
nature of our business.
An investment in our common stock is speculative due to the
nature of our involvement in the acquisition and exploration of oil and natural
gas properties.
Our shareholders may experience dilution as a result of
our issuance of additional common stock or the exercise of outstanding options
and warrants.
19
We may enter into commitments in the future that would require
the issuance of additional common stock. We may also grant additional share
purchase warrants, restricted stock units or stock options. The exercise of
share purchase warrants, restricted stock units or stock options and the
subsequent resale of common stock in the public market could adversely affect
the prevailing market price and our ability to raise equity capital in the
future. Any stock issuances from our treasury will result in immediate dilution
to existing shareholders.
We have never declared or paid cash dividends on our
common stock.
We do not anticipate paying cash dividends on our common stock
in the foreseeable future. Payment of future cash dividends, if any, will be at
the discretion of our Board of Directors and will depend on our financial
condition, results of operations, contractual restrictions, capital
requirements, business prospects and other factors that our Board of Directors
considers relevant. Accordingly, investors may only see a return on their
investment if the value of our securities appreciates.
Our stock price is volatile.
Our common stock is traded on the OTC Bulletin Board and the
OTCQB. There can be no assurance that an active public market will continue for
our common stock, or that the market price for our common stock will not decline
below its current price. Such price may be influenced by many factors,
including, but not limited to, investor perception of us and our industry and
general economic and market conditions. The trading price of our common stock
could be subject to wide fluctuations in response to a variety of matters and
market conditions.
Our common stock will be subject to the Penny Stock
Rules of the SEC.
Our securities will be subject to the penny stock rules
adopted pursuant to Section 15(g) of the Exchange Act. The penny stock rules
apply generally to companies whose common stock trades at less than $5.00 per
share, subject to certain limited exemptions. Such rules require, among other
things, that brokers who trade penny stock to persons other than established
customers complete certain documentation, make suitability inquiries of
investors and provide investors with certain information concerning trading in
the security, including a risk disclosure document and quote information under
certain circumstances. Some brokers have decided not to trade penny stock
because of the requirements of the penny stock rules and, as a result, the
number of broker-dealers willing to act as market makers in such securities is
limited. In the event that we remain subject to the penny stock rules for any
significant period, there may develop an adverse impact on the market, if any,
for our securities. Because our securities are subject to the penny stock
rules, investors will find it more difficult to dispose of our securities.
A decline in the price of our common stock could affect
our ability to raise further working capital and create additional dilution to
existing shareholders upon any financings.
A decline in the price of our common stock could result in a
reduction in the liquidity of our common stock and a reduction in our ability to
raise additional capital for our operations. Because our operations to date have
been principally financed through the sale of equity securities, a decline in
the price of our common stock could have an adverse effect upon our liquidity;
and if we sell such equity securities at a lower price, such sales could cause
excessive dilution to existing shareholders.
We may issue debt to acquire assets.
From time to time our Company may enter into transactions to
acquire assets or the stock of other companies. These transactions may be
financed partially or wholly with debt, which may increase our debt levels above
industry standards. Our governing documents do not limit the amount of
indebtedness that our Company may incur. The level of our indebtedness from time to time could
impair our ability to obtain additional financing in the future on a timely
basis to take advantage of business opportunities that may arise.
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We may issue additional equity securities without the
consent of shareholders. The issuance of any additional equity securities would
further dilute our shareholders.
Our Board of Directors has the authority, without further
action by the shareholders, to issue up to 250,000,000 shares of common stock
authorized under our charter documents, of which 45,731,482 shares were issued
and outstanding as of March 20, 2015. We may issue additional shares of common
stock or other equity securities, including securities convertible into shares
of common stock, in connection with capital raising activities. The issuance of
additional common stock would also result in dilution to existing shareholders.
ITEM
1B. UNRESOLVED
STAFF COMMENTS
We are a smaller reporting company as defined by Rule 12b-2 of
the Exchange Act and are not required to provide the information required under
this item.
ITEM
2.
PROPERTIES
Bulgarian Property - Dobrudja Basin
On October 12, 2010, the Bulgarian Council of Ministers awarded
to the Company a permit for the exploration and prospecting of crude oil and
natural gas in Vranino 1-11 Block. On April 1, 2014, the Company entered into an
Agreement for Crude Oil and Natural Gas Prospecting and Exploration in the
Vranino 1-11 Block with the Ministry of Economy and Energy of Bulgaria (the
License Agreement). The initial term of the License Agreement is five years.
This five-year period will commence once the Bulgarian regulatory authorities
approve of the Companys work programs for the permit area. The License
Agreement (or applicable legislation) provides for possible extension periods
for up to five additional years during the exploration phase, as well as the
conversion of the License Agreement to an exploitation concession, which can
last up to 35 years. Under the License Agreement, the Company will submit a
yearly work program that is subject to approval of the Bulgarian regulatory
authorities.
The Companys commitment is to perform geological and
geophysical exploration activities in the first 3 years of the initial term (the
Exploration and Geophysical Work Stage), followed by drilling activities in
years 4 and 5 of the initial term (the Data Evaluation and Drilling Stage).
The Company is required to drill 10,000 meters (approximately 32,800 feet) of
new wellbore (which may be vertical, horizontal or diagonal) and conduct other
exploration activities during the initial term.
Pursuant to the License Agreement, the Company is obligated to
incur minimum costs during the initial term as follows:
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(iii) |
$925,000 for the Exploration and Geophysical Work Stage;
and |
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(iv) |
$3,675,000 for the Data Evaluation and Drilling
Stage. |
In addition, during the term of the License Agreement, the
Company is obligated to pay an annual land rental fee of 15,897 BGN (US $8,712
based on the exchange rate of .548 Lev to Dollar as of March 20, 2015).
The Company is permitted to commence limited production during
the initial term of the License Agreement. Upon confirmation of a commercial
discovery, the Company is entitled to convert the productive area of the license
to an exploitation concession that may last for up to 35 years provided that the
minimum work commitments are satisfied.
21
On August 26, 2014, the Bulgarian environmental agency approved
the Companys overall work program and first year annual work program. A number
of parties appealed the decision of the environmental agency. An appeals
proceeding has been commenced before an administrative judge panel with an
initial hearing scheduled for May 15, 2015. The Company is participating in that
proceeding as an interested party. The initial term of the License Agreement
will not begin until (i) the appeals proceeding has been completed and the
decision upheld, and (ii) the Ministry of Economy and Energy has approved the
Companys overall work program and first year annual work program. The Company
will continue its data gathering, evaluation and planning during this period.
Reserves Reported to Other Agencies
We have not filed estimates of total in-place resources or
proved oil and gas reserves with any other federal authority or agency in the
United States, Canada or Bulgaria at this time. The Bulgarian property is
currently our only oil and gas prospect. We will file such reports as and when
required under applicable regulations after receiving the exploration
permit.
Productive Wells and Acreage
We presently have no production from any property currently or
during the year ended December 31, 2014.
Undeveloped Acreage
The following table sets forth the amounts of our undeveloped
acreage as of December 31, 2014 as awarded in the License Agreement:
Area |
Undeveloped
Acreage(1) |
|
Gross |
Net |
Bulgaria |
98,205 |
98,205 |
Total: |
98,205 |
98,205 |
|
(1) |
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 and gas regardless
of whether or not such acreage contains proved
reserves. |
Drilling Activity
During the years ended December 31, 2014 and 2013, no wells
were drilled.
Present Activities
The Company is engaged in data gathering, evaluation and
analysis to evaluate the opportunity for the exploration of natural gas and
planning future operations on the permit area. The Company is conducting its
activities through several contracted service firms in Bulgaria operating in the
oil and gas sector. Additionally, the Company has retained experienced
consultants in the UK and the United States to provide analysis of the property
prospects and to assist in developing an exploration strategy.
The Company has evaluated and identified at least one existing
well for re-entry and several potential drilling locations for new wells.
22
ITEM
3. LEGAL
PROCEEDINGS
We are not party to any material legal proceedings and, to our
knowledge, no such proceedings are threatened or contemplated. However, as
previously stated, we are participating as an interested party in the appeals
proceeding in Bulgaria that pertains to objections filed by various parties
regarding the approval of the Companys overall work program and first year
annual work program by the Bulgarian environmental agency. See Item 2
(Properties) above.
ITEM
4. MINE
SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. |
MARKET FOR COMMON EQUITY, RELATED SHAREHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Market Information
Shares of our common stock have been quoted on the OTC Bulletin
Board since June 20, 2006 and the OTCQB since November 16, 2013, and presently
trade under the symbol PKPL.
2014 |
High Bid |
Low Bid |
4th Quarter |
$0.37 |
0.15 |
3rd Quarter |
$0.59 |
0.23 |
2nd Quarter |
$0.25 |
0.16 |
1st Quarter |
$0.23 |
0.15 |
2013 |
|
|
4th Quarter |
$0.25 |
0.14 |
3rd Quarter |
$0.14 |
0.08 |
2nd Quarter |
$0.17 |
0.03 |
1st Quarter |
$0.09 |
0.03 |
Holders
The number of record holders of our common stock, $0.00001 par
value, as of March 20, 2015, was approximately 145.
Dividends
We have not, since the date of our incorporation, declared or
paid any dividends on our common stock. We anticipate that we will retain future
earnings and other cash resources for the operation and development of our
business for the foreseeable future. The payment of dividends in the future will
depend on our earnings, if any, and our financial condition and such other
factors as our Board of Directors considers appropriate.
Equity Compensation Plans
Long-Term Incentive Equity Plans
23
On November 21, 2011, the Company replaced its 2007 Stock
Option Plan and adopted its 2011 Stock Option Plan (the 2011 Plan), which
allows for the issuance of options to purchase up to 2,000,000 shares of common
stock. A copy of the 2011 Plan was filed on November 25, 2011 on Form 8-K, to
which reference should be made for a more complete description of the 2011 Plan.
In connection with the adoption of the Companys 2013 Long-Term Incentive Equity
Plan in October 2013, the Company retired the 2011 Plan, but outstanding grants
under the 2011 Plan remain subject to the terms of the 2011 Plan.
On October 29, 2013, the Companys shareholders adopted the
Companys 2013 Long-Term Incentive Equity Plan (the 2013 Plan). A summary of
the principal features of the 2013 Plan, as well as a copy of the 2013 Plan
document itself, is available in the Companys Schedule 14A filed on September
27, 2013, to which reference should be made for a more complete description of
the 2013 Plan. The 2013 Plan permits grants of stock options (including
incentive stock options and nonqualified stock options), stock appreciation
rights, restricted stock awards, and other stock-based awards. Under the 2013
Plan, any employee (including an employee who is also a director or an officer),
officer, contractor or outside director of the Company whose judgment,
initiative, and efforts contributed or may be expected to contribute to the
successful performance of the Company is eligible to participate in the 2013
Plan, except that only employees are eligible to receive incentive stock
options. Subject to certain adjustments, the maximum number of shares of common
stock that may be delivered under the 2013 Plan is ten percent (10%) of the
Companys authorized and outstanding shares of common stock as determined on the
applicable date of grant of an award under the 2013 Plan.
The various types of long-term incentive awards that may be
granted under the 2013 Plan will enable the Company to respond to changes in
compensation practices, tax laws, accounting regulations and the size and
diversity of its businesses.
During the years ended December 31, 2014 and 2013, the Company
issued 350,000 and 700,000, respectively, of stock options under the 2013
Plan.
The following table provides a summary of the number of stock
options outstanding as at December 31, 2014 under both of our equity
compensation plans:
|
Number of
securities to be
issued upon exercise of outstanding
options, warrants and rights
(a) |
Weighted average
exercise price of outstanding
options, warrants and rights
(b) |
Number of securities
remaining available for future issuance under
equity compensation plans (excluding
securities reflected in column (a)) (c)
|
Equity compensation plans not approved by
security holders (2011 Plan) |
1,050,000 |
$0.10 |
Nil |
Equity compensation plans approved by
security holders (2013 Plan) |
1,050,000 |
$0.23 |
Variable* |
*Subject to 10% rolling maximum more fully described in the
2013 Plan. As of March 20, 2015, the 10% rolling maximum is 4,573,148.
Recent Sales of Unregistered Securities
We have reported sales of securities without registration under
the Securities Act during our fiscal year ended December 31, 2014 on the
following reports, as filed with the Securities and Exchange Commission.
24
Report |
Date of Filing with SEC |
8-K |
March 11, 2014 |
8-K |
March 24, 2014 |
8-K |
July 30,2014 |
Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
We did not purchase any of our shares of common stock or other
securities during the year ended December 31, 2014 and 2013.
ITEM
6. SELECTED
FINANCIAL DATA
We are a smaller reporting company as defined by Rule 12b-2 of
the Exchange Act and are not required to provide the information required under
this item.
ITEM
7. MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Managements Discussion and Analysis of Financial Condition and
Results of Operations (MD&A) is intended to provide readers of our
financial statements with a narrative from the perspective of our management on
our financial condition, results of operations, liquidity, and certain other
factors that may affect our future results. Our MD&A is presented in the
following sections:
|
|
Executive Summary |
|
|
Results of Operations |
|
|
Liquidity and Capital Resources |
|
|
Recent Accounting Pronouncements |
|
|
Forward-Looking Statements.
|
Our MD&A should be read in conjunction with our
Consolidated Financial Statements and related Notes in Item 8, Financial
Statements and Supplementary Data, of this Annual Report on Form 10-K.
Executive Summary
Park Place is an energy company engaged in oil and gas
exploration in Bulgaria.
On April 1, 2014, the Company entered into an Agreement for
Crude Oil and Natural Gas Prospecting and Exploration in the Vranino 1-11 Block
with the Ministry of Economy and Energy of Bulgaria (the License Agreement).
The initial term of the License Agreement is five years. This five-year period
will commence once the Bulgarian regulatory authorities approve of the Companys
work programs for the permit area. The License Agreement (or applicable
legislation) provides for possible extension periods for up to five additional
years during the exploration phase, as well as the conversion of the License
Agreement to an exploitation concession, which can last up to 35 years. Under
the License Agreement, the Company will submit a yearly work program that is
subject to approval of the Bulgarian regulatory authorities.
25
The Companys commitment is to perform geological and
geophysical exploration activities in the first 3 years of the initial term (the
Exploration and Geophysical Work Stage), followed by drilling activities in
years 4 and 5 of the initial term (the Data Evaluation and Drilling Stage).
The Company is required to drill 10,000 meters (approximately 32,800 feet) of
new wellbore (which may be vertical, horizontal or diagonal) and conduct other
exploration activities during the initial term.
Pursuant to the License Agreement, the Company is obligated to
incur minimum costs during the initial term as follows:
|
(i) |
$925,000 for the Exploration and Geophysical Work Stage;
and |
|
(ii) |
$3,675,000 for the Data Evaluation and Drilling
Stage. |
In addition, during the term of the License Agreement, the
Company is obligated to pay an annual land rental fee of 15,897 BGN (US $8,712
based on the exchange rate of .548 Lev to Dollar as of March 20, 2015).
The Company is permitted to commence limited production during
the initial term of the License Agreement. Upon confirmation of a commercial
discovery, the Company is entitled to convert the productive area of the license
to an exploitation concession that may last for up to 35 years provided that the
minimum work commitments are satisfied.
On August 26, 2014, the Bulgarian environmental agency approved
the Companys overall work program and first year annual work program. A number
of parties appealed the decision of the environmental agency. An appeals
proceeding has been commenced before an administrative judge panel with an
initial hearing scheduled for May 15, 2015. The Company is participating in that
proceeding as an interested party. The initial term of the License Agreement
will not begin until (i) the appeals proceeding has been completed and the
decision upheld, and (ii) the Ministry of Economy and Energy has approved the
Companys overall work program and first year annual work program. The Company
will continue its data gathering, evaluation and planning during this period.
Results of Operations
Revenue
We are a pre-revenue stage company, and our future revenues
depend upon successful extraction of oil and gas deposits for sale.
Expenses
Our total operating expenses for the year ended December 31,
2014 were $813,161 compared to $697,870 for the year ended December 31, 2013.
Our general and administrative expenses increased to $813,161
for the year ended December 31, 2014 from $696,860 for the year ended December
31, 2013. Our overhead increased due to the retention of more consultants and
increased general activity of the Company over last year.
Other Income (Expense)
For the year ended December 31, 2014, other income (expense)
was a loss of $59,623 attributable to foreign exchange loss. For the year ended
December 31, 2013, other income (loss) was a income of $7,332 primarily driven
by a gain on sale of a subsidiary offset by foreign exchange loss and loss on
settlement of debt.
Loss
26
Our net loss for the year ended December 31, 2014 was $872,784
compared to $690,548 for the year ended December 31, 2013.
Liquidity and Capital Resources
The following table summarizes our liquidity position as of
December 31, 2014 and 2013.
|
|
As of |
|
|
As of |
|
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
Cash |
$ |
1,539,439 |
|
$ |
32,782 |
|
|
|
|
|
|
|
|
Working capital (deficit) |
|
1,288,877 |
|
|
(68,364 |
) |
|
|
|
|
|
|
|
Total assets |
|
3,753,896 |
|
|
1,337,914 |
|
|
|
|
|
|
|
|
Total liabilities |
|
268,862 |
|
|
197,777 |
|
|
|
|
|
|
|
|
Shareholders equity |
$ |
3,485,034 |
|
$ |
1,140,137 |
|
The increase in the overall liquidity of the Company was due to
the issuance of 13,506,430 shares of common stock for net proceeds of
$2,981,850.
Cash Used in Operating Activities
We used net cash of $592,778 in operating activities for the
year ended December 31, 2014 compared to $399,195 for the year ended December
31, 2013 primarily due to a greater loss for year ended December 31, 2014.
Cash Used In Investing Activities
Net cash used for investing activities in the year ended
December 31, 2014 was $882,793 compared to $833,439 for the year ended December
31, 2013.
Cash Provided By Financing Activities
We have funded our business to date primarily from sales of our
common stock through private placements. In the year ended December 31, 2014, we
received cash of $2,981,850 as a result of proceeds from the sale of our common
stock compared to $1,253,286 for the year ended December 31, 2013.
Future Operating Requirements
Based on our current plan of operations, we estimate that we
will require approximately $1,200,000 to pursue our plan of operations over the
next 12 months.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
27
Stock Based Compensation
We have a stock-based compensation plan covering employees,
consultants and our directors. See Notes 5,6 and 7 of the Notes to the
Consolidated Financial Statements.
Contractual Obligation and Commercial Commitments
See the Executive Summary of this MD&A relating to our
commitment under the Bulgarian License.
Critical Accounting Policies and Estimates
Our consolidated financial statements and accompanying notes
have been prepared in accordance with U.S. generally accepted accounting
principles (GAAP) applied on a consistent basis. The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods.
We regularly evaluate the accounting policies and estimates
that we use to prepare our consolidated financial statements. In general,
managements estimates are based on historical experience, on information from
third party professionals, and on various other assumptions that are believed to
be reasonable under the facts and circumstances. Actual results could differ
from those estimates made by management.
We believe that our critical accounting policies and estimates
include the following:
Oil and gas properties
The Company follows the full cost method of accounting for oil
and natural gas operations, whereby all costs of exploring for and developing
oil and natural gas reserves are capitalized and accumulated in cost centers on
a country-by-country basis. Costs include land acquisition costs, geological and
geophysical charges, carrying charges on non-productive properties and costs of
drilling both productive and non-productive wells. General and administrative
costs are not capitalized other than to the extent of the Companys working
interest in operated capital expenditure programs on which operators fees have
been charged equivalent to standard industry operating agreements.
The costs in each cost center, including the costs of well
equipment, are depleted and depreciated using the unit-of-production method
based on the estimated proved reserves before royalties. Natural gas reserves
and production are converted to equivalent barrels of crude oil based on
relative energy content. The costs of acquiring and evaluating significant
unproved properties are initially excluded from depletion calculations. These
unevaluated properties are assessed periodically to ascertain whether impairment
has occurred. When proved reserves are assigned or the property is considered to
be impaired, the cost of the property or the amount of the impairment is added
to costs subject to depletion.
The capitalized costs less accumulated depletion and
depreciation in each cost center are limited to an amount equal to the estimated
future net revenue from proved reserves (based on prices and costs at the
balance sheet date) plus the cost (net of impairments) of unproved properties.
The total capitalized costs less accumulated depletion and depreciation, site
restoration provision and future income taxes of all cost centers are further
limited to an amount equal to the future net revenue from proved reserves plus
the cost (net of impairments) of unproved properties of all cost centers less
estimated future site restoration costs, general and administrative expenses,
financing costs and income taxes.
28
Proceeds from the sale of oil and natural gas properties are
applied against capitalized costs, with no gain or loss recognized, unless such
a sale would significantly alter the rate of depletion and depreciation.
Stock-based compensation
The Company accounts for share-based compensation under the
provisions of ASC 718 Compensation Stock Compensation. ASC 718 requires that
all stock-based compensation be recognized as an expense in the financial
statements and that such cost be measured at the fair value of the award.
Recent accounting pronouncements
The Company has implemented all new accounting pronouncements
that are in effect and that may impact its financial statements and does not
believe that there are any other new accounting pronouncements that have been
issued that might have a material impact on its financial position or results of
operations.
ITEM
7A. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of
the Exchange Act and are not required to provide the information required under
this item.
29
ITEM
8.
FINANCIAL STATEMENTS
PARK PLACE ENERGY CORP.
Index to Financial Statements
30
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Park Place
Energy Corp. (the Company)
We have audited the accompanying consolidated balance sheet of
Park Place Energy Corp. as of December 31, 2013 and the related consolidated
statements of operations, stockholders equity (deficit), and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial
reporting. An audit includes consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2013 and the results of its operations and its cash
flows for the year then ended, in conformity with accounting principles
generally accepted in the United States.
/s/ SATURNA GROUP CHARTERED ACCOUNTANTS LLP
Saturna Group Chartered Accountants LLP
Vancouver, Canada
March 27, 2014
31
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Park Place
Energy Corp.
We have audited the accompanying consolidated balance sheet of
Park Place Energy Corp. and subsidiaries (the Company), as of December 31,
2014, and the related consolidated statements of operations, stockholders
equity, comprehensive loss, and cash flows for the year ended December 31, 2014.
The Companys management is responsible for these consolidated financial
statements. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of the
Company, as of December 31, 2014, and the results of their operations and their
cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
/s/ Whitley Penn LLP
March 31, 2015
Dallas, Texas
32
PARK PLACE ENERGY CORP.
Consolidated balance sheets
(Expressed in U.S. dollars)
|
|
December 31, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
$ |
1,539,439 |
|
$ |
32,782 |
|
Receivables |
|
6,307 |
|
|
91,375 |
|
Prepaid expenses and deposits |
|
11,993 |
|
|
5,256 |
|
|
|
|
|
|
|
|
Total current assets |
|
1,557,739 |
|
|
129,413 |
|
|
|
|
|
|
|
|
Restricted cash |
|
|
|
|
2,300 |
|
Oil and gas properties |
|
2,196,157 |
|
|
1,206,201 |
|
|
|
|
|
|
|
|
Total assets |
$ |
3,753,896 |
|
$ |
1,337,914 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
$ |
268,862 |
|
$ |
197,777 |
|
Total liabilities |
|
268,862 |
|
|
197,777 |
|
|
|
|
|
|
|
|
Commitments and contigencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
Authorized:
250,000,000 shares, par value
$0.00001 Issued and outstanding:
45,624,427 and 32,063,447 shares, respectively |
|
456 |
|
|
321 |
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
17,072,916 |
|
|
13,748,758 |
|
|
|
|
|
|
|
|
Stock subscriptions and stock to be issued |
|
46,116 |
|
|
153,286 |
|
|
|
|
|
|
|
|
Accumulated other comprehensive
gain |
|
558 |
|
|
- |
|
|
|
|
|
|
|
|
Accumulated deficit |
|
(13,635,012 |
) |
|
(12,762,228 |
) |
|
|
|
|
|
|
|
Total stockholders equity |
|
3,485,034 |
|
|
1,140,137 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
$ |
3,753,896 |
|
$ |
1,337,914 |
|
See accompanying notes to consolidated financial statements.
33
PARK PLACE ENERGY CORP.
Consolidated statements of
operations
(Expressed in U.S. dollars)
|
|
Year ended |
|
|
Year ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
$ |
|
|
$ |
1,010 |
|
General and administrative |
|
813,161 |
|
|
696,860 |
|
|
|
|
|
|
|
|
Total expenses |
|
813,161 |
|
|
697,870 |
|
|
|
|
|
|
|
|
Loss
before other income (expense) |
|
(813,161 |
) |
|
(697,870 |
) |
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange loss |
|
(59,623 |
) |
|
(8,049 |
) |
Gain on sale of
subsidiary |
|
|
|
|
19,775 |
|
Loss on settlement of debt |
|
|
|
|
(3,414 |
) |
Loss on disposal of property and equipment |
|
|
|
|
(990 |
) |
|
|
|
|
|
|
|
Total other income (expense) |
|
(59,623 |
) |
|
7,322 |
|
|
|
|
|
|
|
|
Loss before income taxes |
|
(872,784 |
) |
|
(690,548 |
) |
|
|
|
|
|
|
|
Income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period |
$ |
(872,784 |
) |
$ |
(690,548 |
) |
|
|
|
|
|
|
|
Loss per share, basic and diluted |
$ |
(0.02 |
) |
$ |
(0.03 |
) |
|
|
|
|
|
|
|
Weighted average number of shares outstanding |
|
39,749,796 |
|
|
24,598,535 |
|
See accompanying notes to consolidated financial statements.
34
PARK PLACE ENERGY CORP.
Consolidated statements of
comprehensive loss
(Expressed in U.S. dollars)
|
|
Year ended |
|
|
Year ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
Net loss |
$ |
(872,784 |
) |
$ |
(690,548 |
) |
Other comprehensive income: |
|
|
|
|
|
|
Foreign currency cumulative translation
adjustment |
|
558 |
|
|
- |
|
Comprehensive loss for the year |
$ |
(872,226 |
) |
$ |
(690,548 |
) |
See accompanying notes to consolidated financial statements.
35
PARK PLACE ENERGY CORP.
Consolidated statements of
stockholders equity
(Expressed in U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
subscriptions |
|
|
Other |
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
paid-in |
|
|
and stock to |
|
|
Comprehensive |
|
|
Accumulated |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
be issued |
|
|
Income |
|
|
Deficit |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2012 |
|
20,667,581 |
|
$ |
207 |
|
$ |
12,406,065 |
|
$ |
|
|
$ |
|
|
$ |
(12,071,680 |
) |
$ |
334,592 |
|
Issuance of common stock for cash |
|
11,000,000 |
|
|
110 |
|
|
1,099,890 |
|
|
|
|
|
|
|
|
|
|
|
1,100,000 |
|
Issuance of common stock for settlement of
debt |
|
75,866 |
|
|
1 |
|
|
9,103 |
|
|
|
|
|
|
|
|
|
|
|
9,104 |
|
Issuance of common stock for consulting services |
|
320,000 |
|
|
3 |
|
|
21,597 |
|
|
|
|
|
|
|
|
|
|
|
21,600 |
|
Share subscriptions received |
|
|
|
|
|
|
|
|
|
|
153,286 |
|
|
|
|
|
|
|
|
153,286 |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
212,103 |
|
|
|
|
|
|
|
|
|
|
|
212,103 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(690,548 |
) |
|
(690,548 |
) |
Balance, December
31, 2013 |
|
32,063,447 |
|
|
321 |
|
|
13,748,758 |
|
|
153,286 |
|
|
|
|
|
(12,762,228 |
) |
|
1,140,137 |
|
Issuance of common stock for cash |
|
13,506,430 |
|
|
135 |
|
|
3,150,651 |
|
|
(153,286 |
) |
|
|
|
|
|
|
|
2,997,500 |
|
Issuance of common stock for consulting services |
|
32,800 |
|
|
|
|
|
2,624 |
|
|
|
|
|
|
|
|
|
|
|
2,624 |
|
Stock issuance costs |
|
|
|
|
|
|
|
(15,650 |
) |
|
|
|
|
|
|
|
|
|
|
(15,650 |
) |
Stock-based compensation expense |
|
|
|
|
|
|
|
84,474 |
|
|
46,116 |
|
|
|
|
|
|
|
|
130.590 |
|
Restricted stock granted for services |
|
|
|
|
|
|
|
102,059 |
|
|
|
|
|
|
|
|
|
|
|
102.059 |
|
Issuance of common stock upon vesting of restricted stock
units |
|
21,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
558 |
|
|
|
|
|
558 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(872,784 |
) |
|
(872,784 |
) |
Balance, December 31, 2014 |
|
45,624,427 |
|
$ |
456 |
|
$ |
17,072,916 |
|
$ |
46,116 |
|
$ |
558 |
|
$ |
(13,635,012 |
) |
$ |
3,485,034 |
|
See accompanying notes to the consolidated financial
statements.
36
PARK PLACE ENERGY CORP.
Consolidated statements of
cash flows
(Expressed in U.S. dollars)
|
|
Year ended |
|
|
Year ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
|
Operating activities |
|
|
|
|
|
|
Net loss |
$ |
(872,784 |
) |
$ |
(690,548 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
|
|
|
|
Depreciation |
|
|
|
|
1,010 |
|
Gain on sale of
subsidiary |
|
|
|
|
(19,775 |
) |
Loss on settlement of debt |
|
|
|
|
3,414 |
|
Loss on disposal
of property and equipment |
|
|
|
|
990 |
|
Stock-based compensation |
|
130,590 |
|
|
212,103 |
|
Changes in operating assets
and liabilities: |
|
|
|
|
|
|
Receivables |
|
85,068 |
|
|
(86,583 |
) |
Prepaid expenses
and deposits |
|
(6,737 |
) |
|
8,716 |
|
Accounts payable and accrued
liabilities |
|
71,085 |
|
|
170,778 |
|
Due to/from related parties |
|
|
|
|
700 |
|
Net cash used in
operating activities |
|
(592,778 |
) |
|
(399,195 |
) |
Investing activities |
|
|
|
|
|
|
Restricted cash |
|
2,300 |
|
|
6,325 |
|
Oil and gas properties expenditures |
|
(885,273 |
) |
|
(839,764 |
) |
Net cash used in
investing activities |
|
(882,973 |
) |
|
(833,439 |
) |
Financing activities |
|
|
|
|
|
|
Proceeds from issuance of common stock |
|
2,997,500 |
|
|
1,100,000 |
|
Share issuance costs |
|
(15,650 |
) |
|
- |
|
Stock
subscriptions received |
|
- |
|
|
153,286 |
|
Net cash provided by financing activities |
|
2,981,850 |
|
|
1,253,286 |
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash
equivalents |
|
558 |
|
|
- |
|
Change in cash |
|
1,506,657 |
|
|
20,652 |
|
Cash, beginning of year |
|
32,782 |
|
|
12,130 |
|
Cash, end of year |
$ |
1,539,439 |
|
$ |
32,782 |
|
|
|
|
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
Common stock issued to settle
debt |
$ |
|
|
$ |
9,104 |
|
Stock subscriptions received |
|
(153,286 |
) |
|
- |
|
Issuance of common stock for consulting services |
|
2,624 |
|
|
- |
|
Issuance of common stock upon vesting of restricted stock units |
|
102,059 |
|
|
21,600 |
|
See accompanying notes to consolidated financial statements.
37
PARK PLACE ENERGY CORP.
Notes to Consolidated
Financial Statements
(Expressed in U.S. dollars)
1. |
Nature of Business |
|
|
|
Park Place Energy Corp. (the Company) was incorporated
under the laws of the State of Nevada on August 27, 2004 under the name ST
Online Corp. On July 30, 2007, the Company acquired Park Place Energy
(Canada) Inc. and changed its name. The Company is in the business of
acquiring and exploring oil and gas properties. On December 30, 2013, the
Company disposed Park Place Energy (Canada) Inc. The Company has not
produced significant revenue from its principal business. |
|
|
2. |
Summary of Significant Accounting
Policies |
|
(a) |
Basis of Presentation |
|
|
|
|
|
These consolidated financial statements for 2014 include
the accounts of the Company and its wholly owned subsidiary, BG
Exploration EOOD, a company incorporated under the laws of Bulgaria. For
2013 the accounts of the Company also included Park Place Energy (Canada)
Inc. until its date of disposal. All inter-company transactions and
balances have been eliminated upon consolidation. |
|
|
|
|
(b) |
Use of Estimates |
|
|
|
|
|
The preparation of consolidated financial statements in
conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. The Company regularly evaluates estimates and assumptions related
to the estimated useful lives and recoverability of long-lived assets,
impairment of oil and gas properties, fair value of stock-based
compensation, and deferred income tax asset valuation allowances. The
Company bases its estimates and assumptions on current facts, historical
experience and various other factors that it believes to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities and the
accrual of costs and expenses that are not readily apparent from other
sources. The actual results experienced by the Company may differ
materially and adversely from the Companys estimates. To the extent there
are material differences between the estimates and the actual results,
future results of operations will be affected. |
|
|
|
|
(c) |
Cash and Cash Equivalents |
|
|
|
|
|
The Company considers all highly liquid instruments with
maturity of three months or less at the time of issuance to be cash
equivalents. |
|
|
|
|
(d) |
Long-lived Assets |
|
|
|
|
|
In accordance with Accounting Standards Codification
(ASC) 360, Property, Plant and Equipment, the Company tests long-lived
assets or asset groups for recoverability when events or changes in
circumstances indicate that their carrying amount may not be recoverable.
Circumstances that could trigger a review include, but are not limited to:
significant decreases in the market price of the assets; significant
adverse changes in the business climate or legal factors; accumulation of
costs significantly in excess of the amount originally expected for the
acquisition or construction of the assets; current period cash flow or
operating losses combined with a history of losses or a forecast of
continuing losses associated with the use of the assets; and current
expectation that the assets will more likely than not be sold or disposed
significantly before the end of their estimated useful life.
Recoverability is assessed based on the carrying amount of the assets and their fair
value, which is generally determined based on the sum of the undiscounted
cash flows expected to result from the use and the eventual disposal of
the assets, as well as specific appraisal in certain instances. An
impairment loss is recognized when the carrying amount of the assets is
not recoverable and exceeds fair value. |
38
|
(e) |
Oil and Gas Properties |
|
|
|
|
|
The Company follows the full cost method of accounting
for oil and natural gas operations, whereby all costs of exploring for and
developing oil and natural gas reserves are capitalized and accumulated in
cost centers on a country-by-country basis. Costs include: licence and
land acquisition costs, geological, engineering, geophysical, seismic and
other data, carrying charges on non-productive properties and costs of
drilling and completing both productive and non-productive wells. General
and administrative costs which are associated with acquisition,
exploration and development activities are capitalized. General and
administrative costs are capitalized other than to the extent of the
Companys working interest in operated capital expenditure programs on
which operators fees have been charged equivalent to standard industry
operating agreements. |
|
|
|
|
|
The costs in each cost center, including the costs of
well equipment, are depleted and depreciated using the unit-of-production
method based on the estimated proved reserves before royalties. The costs
of acquiring and evaluating significant unproved properties are initially
excluded from depletion calculations. These unevaluated properties are
assessed periodically to ascertain whether impairment has occurred. When
proved reserves are assigned or the property is considered to be impaired,
the cost of the property or the amount of the impairment is added to costs
subject to depletion. |
|
|
|
|
|
The capitalized costs (less accumulated depletion and
depreciation in each cost center) are limited to an amount equal to the
estimated future net revenue from proved reserves (based on prices and
costs at the balance sheet date) plus the cost (net of impairments) of
unproved properties. The total capitalized costs, less accumulated
depletion and depreciation, site restoration provision and future income
taxes of all cost centers, is further limited to an amount equal to the
future net revenue from proved reserves plus the cost (net of impairments)
of unproved properties of all cost centers less estimated future site
restoration costs, general and administrative expenses, financing costs
and income taxes. |
|
|
|
|
|
Proceeds from the sale of oil and natural gas properties
are applied against capitalized costs, with no gain or loss recognized,
unless such a sale would significantly alter the rate of depletion and
depreciation. |
|
|
|
|
(f) |
Asset Retirement Obligations |
|
|
|
|
|
The Company records the fair value of an asset retirement
obligation as a liability in the period in which it incurs a legal
obligation associated with the retirement of tangible long-lived assets
that results from the acquisition, construction, development, and/or
normal use of the long-lived assets. The Company also records a
corresponding asset that is amortized over the life of the asset.
Subsequent to the initial measurement of the asset retirement obligation,
the obligation is adjusted at the end of each period to reflect the
passage of time (accretion expense) and changes in the estimated future
cash flows underlying the obligation (asset retirement cost). The Company
does not have any significant asset retirement obligations. |
|
|
|
|
(g) |
Financial Instruments and Fair Value Measures |
|
|
|
|
|
ASC 820 (Fair Value Measurements and Disclosures)
requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. ASC 820
establishes a fair value hierarchy based on the level of independent,
objective evidence surrounding the inputs used to measure fair value. A
financial instruments categorization within the fair value
hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. ASC 820 prioritizes the
inputs into three levels that may be used to measure fair value: |
39
Level 1
Level 1 applies to assets or
liabilities for which there are quoted prices in active markets for identical
assets or liabilities.
Level 2
Level 2 applies to assets or
liabilities for which there are inputs other than quoted prices that are
observable for the asset or liability, such as quoted prices for similar assets
or liabilities in active markets; quoted prices for identical assets or
liabilities in markets with insufficient volume or infrequent transactions (less
active markets); or model-derived valuations in which significant inputs are
observable or can be derived principally from, or corroborated by, observable
market data.
Level 3
Level 3 applies to assets or
liabilities for which there are unobservable inputs to the valuation methodology
that are significant to the measurement of the fair value of the assets or
liabilities.
|
|
The Companys financial instruments consist principally
of cash, receivables, and accounts payable and accrued liabilities.
Pursuant to ASC 820, the fair value of cash is determined based on Level
1 inputs, which consist of quoted prices in active markets for identical
assets. The recorded values of all other financial instruments approximate
their current fair values because of their nature and respective maturity
dates or durations. |
|
|
|
|
(h) |
Income Taxes |
|
|
|
|
|
The Company accounts for income taxes using the asset and
liability method in accordance with ASC 740, Accounting for Income
Taxes. The asset and liability method provides that deferred tax assets
and liabilities are recognized for the expected future tax consequences of
temporary differences between the financial reporting and tax bases of
assets and liabilities, and for operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using the
currently enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The Company records a valuation
allowance to reduce deferred tax assets to the amount that is believed
more likely than not to be realized. |
|
|
|
|
|
As of December 31, 2014 and 2013, the Company did not
have any amounts recorded pertaining to uncertain tax positions. The
Company recognizes interest and penalties related to uncertain tax
positions in general and administrative expense. During the years ended
December 31, 2014 and 2013, the Company recognized penalties of $0 and
$120,000, respectively, in general and administrative expense. The
Companys tax years 2011 and forward remain open for review. |
|
|
|
|
(i) |
Foreign Currency Translation |
|
|
|
|
|
Operations outside the United States prepare financial
statements in currencies other than the United States dollar. The income
statement amounts are translated at average exchange rates for the year,
while the assets and liabilities are translated at year-end exchange
rates. Translation adjustments are accumulated as a separate component of
stockholders' equity and other comprehensive income. The functional
currency of our Bulgarian operations is considered to be the Bulgarian
Lev. |
40
|
(j) |
Stock-based Compensation |
|
|
|
|
|
The Company records stock-based compensation in
accordance with ASC 718 (Compensation Stock Compensation) using the
fair value method. All transactions in which goods or services are the
consideration received for the issuance of equity instruments are
accounted for based on the fair value of the consideration received or the
fair value of the equity instrument issued, whichever is more reliably
measurable. |
|
|
|
|
|
The Company uses the Black-Scholes option pricing model
to calculate the fair value of stock-based awards. This model is affected
by the Companys stock price as well as assumptions regarding a number of
subjective variables. These subjective variables include, but are not
limited to, the Companys expected stock price volatility over the term of
the awards, and actual and projected stock option exercise behaviors. The
value of the portion of the award that is ultimately expected to vest is
recognized as an expense in the statement of operations over the requisite
service period. |
|
|
|
|
(k) |
Loss Per Share |
|
|
|
|
|
The Company computes loss per share of Company stock in
accordance with ASC 260 ("Earnings per Share"), which requires
presentation of both basic and diluted earnings per share (EPS) on the
face of the income statement. Basic EPS is computed by dividing the loss
available to common shareholders (numerator) by the weighted average
number of shares outstanding (denominator) during the period. Diluted EPS
gives effect to all dilutive potential common shares outstanding during
the period using the treasury stock method and convertible preferred stock
using the if-converted method. In computing diluted EPS, the average stock
price for the period is used in determining the number of shares assumed
to be purchased from the exercise of stock options or warrants. Diluted
EPS excludes all dilutive potential shares if their effect is
anti-dilutive. As at December 31, 2014 and 2013, the Company had
13,987,422 and 12,800,000 potentially dilutive shares outstanding,
respectively. |
|
|
|
|
(l) |
Comprehensive Loss |
|
|
|
|
|
Comprehensive loss consists of net loss and other related
gains and losses affecting stockholders equity that are excluded from net
income or loss. |
|
|
|
|
(m) |
Reclassifications |
|
|
|
|
|
Certain reclassifications have been made to the prior
years consolidated financial statements to conform to the current years
presentation. |
|
|
|
|
(n) |
Recent Accounting Pronouncements |
|
|
|
|
|
The Company has implemented all new accounting
pronouncements that are in effect and that may impact its financial
statements and does not believe that any other new accounting
pronouncements have been issued that might have a material impact on its
financial position or results of operations. |
41
3. |
Sale of Park Place Energy (Canada) Inc. |
|
|
|
On December 30, 2013, the Company completed the sale of
its wholly-owned subsidiary Park Place Energy (Canada) Inc. to a
non-related party for proceeds of $10, resulting in a gain of $19,775 on
sale of subsidiary. |
Property and equipment |
$ |
3,364 |
|
Accounts payable
|
|
(23,129 |
)
|
Net liabilities sold |
|
(19,765 |
) |
Cash proceeds
received |
|
10
|
|
Gain on sale of subsidiary |
$ |
19,775 |
|
4. |
Oil and Gas Properties |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
2014 |
|
|
2013 |
|
|
Unproven properties |
|
|
|
|
|
|
|
Bulgaria |
$ |
2,196,157 |
|
$ |
1,206,201 |
|
|
The Company holds a 98,205 acre oil and gas exploration
claim in the Dobrudja Basin located in northeast Bulgaria (the Block).
The Company intends to conduct exploration for natural gas and test
production activities over a five year period in accordance with or
exceeding its minimum work program obligation, which includes five wells,
and additional testing and work. The Company intends to commence its work
program efforts in 2015. |
|
|
5. |
Common Stock |
|
(a) |
On January 14, 2013, the Company increased its authorized
capital to 250,000,000 shares of common stock with no change in par
value. |
|
|
|
|
(b) |
On May 1, 2013, the Company issued 200,000 shares of
common stock with a fair value of $12,000 for consulting fees that was
recorded in oil and gas properties. |
|
|
|
|
(c) |
On May 22, 2013, the Company issued 75,866 shares of
common stock with a fair value of $9,103 to settle accounts payable of
$5,690 to a company controlled by a director of the Company. This resulted
in a loss on settlement of debt of $3,414. |
|
|
|
|
(d) |
On August 19, 2013, the Company issued 120,000 shares of
common stock with a fair value of $9,600 for consulting fees that was
recorded in oil and gas properties. |
42
|
(e) |
On August 30, 2013, the Company issued 11,000,000 units
at a price of $0.10 per unit for proceeds of $1,100,000. Each unit
consisted of one share of common stock and one share purchase warrant
exercisable at a price of $0.20 per share expiring on August 29,
2016. |
|
|
|
|
(f) |
As of December 31, 2013, the Company had received
subscriptions for 766,430 shares of common stock at a price of $0.20 per
share for proceeds of $153,286, which is included in stock subscriptions
received. |
|
|
|
|
(g) |
During the year ended December 31, 2014, the Company
issued 13,506,430 shares of common stock for proceeds of
$2,997,500. |
|
|
|
|
(h) |
During the year ended December 31, 2014, the Company
issued 32,800 shares of common stock with a fair value of $2,624. The
services were valued based on the fair market value of
the shares exchanged, which approximate the fair market value of the services
received. |
|
|
|
|
(i) |
During the year ended December 31, 2014, the Company issued 21,750 share of common stock upon the vesting of restricted stock units. |
6. |
Stock Options
|
| |
|
The Company has issued stock options (and other stock-based awards) pursuant to two equity plans, the 2013 Long-Term Incentive Plan (the “2013 LTIP”) and the 2011 Stock Option Plan (which was replaced by the 2013
LTIP). The 2013 LTIP permits grants of stock options, stock appreciation rights, restricted stock awards and other stock-based awards. Under the 2013 LTIP, the maximum number of shares of authorized stock that may be delivered is 10% of the total
number of shares of common stock issued and outstanding of the Company as determined on the applicable date of grant of an award under the 2013 LTIP. Under the 2013 LTIP, the exercise price of each option (or other stock-based award) shall not be
less than the market price of the Company’s stock as calculated immediately preceding the day of the grant. The vesting schedule for each option (or other stock-based award) shall be specified by the Board of Directors at the time of grant.
The maximum term of options (or other stock-based award) granted is ten years or such lesser time as determined by the Board of Directors at the time of grant.
|
43
The following table summarizes the
continuity of the Companys stock options:
|
|
|
|
|
|
Weighted |
|
Weighted |
|
|
|
|
|
|
|
|
|
|
average |
|
average |
|
|
Aggregate |
|
|
|
|
Number |
|
|
exercise |
|
fair value |
|
|
intrinsic |
|
|
|
|
of
options |
|
|
price |
|
price |
|
|
value |
|
|
Outstanding, December 31, 2012 |
|
300,000 |
|
$ |
0.10 |
$ |
0.09 |
|
|
|
|
|
Granted |
|
1,500,000 |
|
|
0.16 |
|
0.14 |
|
|
|
|
|
Outstanding, December 31, 2013 |
|
1,800,000 |
|
|
0.15 |
|
0.13 |
|
|
|
|
|
Granted |
|
350,000 |
|
|
0.24 |
|
0.20 |
|
|
|
|
|
Expired |
|
(50,000 |
) |
|
0.10 |
|
0.09 |
|
|
|
|
|
Outstanding,
December 31, 2014 |
|
2,100,000 |
|
|
0.17 |
|
0.14 |
|
$ |
- |
|
Additional information regarding stock
options as of December 31, 2014, is as follows:
|
Outstanding |
|
Exercisable |
|
|
Weighted |
|
|
|
|
|
|
average |
|
|
|
|
|
|
remaining |
Weighted |
|
|
Weighted |
Range of |
Number of |
contractual |
average |
|
Number of |
average |
exercise prices |
shares |
life
(years) |
exercise price |
|
shares |
exercise price |
$ 0.10 |
1,050,000 |
2.7 |
$ 0.10 |
|
1,000,000 |
$ 0.10 |
0.20 |
100,000 |
2.0 |
0.20 |
|
50,000 |
0.20 |
0.23-0.235 |
850,000 |
1.9 |
0.23 |
|
825,000 |
0.23 |
0.28 |
100,000 |
2.6 |
0.28 |
|
50,000 |
0.28 |
|
2,100,000 |
2.3 |
$ 0.17 |
|
1,925,000 |
$ 0.16 |
The fair values for stock options
granted have been estimated using the Black-Scholes option pricing model
assuming no expected dividends and the following weighted average
assumptions:
|
2014
|
2013
|
Risk-free interest rate |
0.81% |
.91% |
Expected life (in years) |
3.0 |
3.8 |
Expected volatility |
173% |
188%
|
44
|
The fair value of stock options vested during the year
ended December 31, 2014 and 2013 was $60,429 and $212,103, respectively,
that was recorded as stock-based compensation and included in general and administrative expenses.
The weighted average fair value of stock options granted during the year
ended December 31, 2014 and 2013 was $0.20 and $0.15 per option,
respectively. At December 31, 2014, the Company had $25,000 in unrecognized compensation expense related to stock options that will be expensed through January 2017. |
|
|
7. |
The following table summarizes the continuity of share
purchase warrants: |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
average |
|
|
|
|
|
|
|
Number of |
|
|
exercise |
|
|
|
|
|
|
|
warrants |
|
|
price |
|
|
Expire |
|
|
Balance, December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued |
|
11,000,000 |
|
|
$0.20 |
|
|
|
|
|
Balance, December 31, 2013 |
|
11,000,000 |
|
|
0.20
|
|
|
|
|
|
Balance, December 31, 2014 |
|
11,000,000 |
|
|
0.20 |
|
|
2016 |
|
8. |
Restricted Stock Units |
|
|
|
During 2014, the Company granted restricted stock units
(RSUs) with vesting periods ranging from one month to sixteen months.
Officers of the Company were granted 443,467 RSUs with a fair value of
$101,798. Expense related to RSUs is recognized ratably over the vesting
period. |
|
|
|
Number of |
|
|
Weighted |
|
|
|
|
restricted stock |
|
|
average fair |
|
|
|
|
units |
|
|
value per award |
|
|
Balance, December 31, 2013
|
|
|
|
|
|
|
|
Issued |
|
1,082,122 |
|
$ |
0.26 |
|
|
Vested |
|
(194,700 |
) |
|
0.28 |
|
|
Balance, December 31, 2014 |
|
887,442 |
|
$ |
0.25 |
|
|
At December 31, 2014 unrecognized compensation expense
related to RSUs totaled $76,311 that will be recognized over a weighted
average period of 0.9 years. The total fair value of shares vested and
released during fiscal year 2014 was $54,516. |
|
|
|
9. |
Related Party |
|
|
|
|
(a) |
During the year ended December 31, 2013, the Company
incurred management and consulting fees of $13,000 to a company controlled
by the former President of the Company. |
|
|
|
|
(b) |
During the year ended December 31, 2013, the Company
incurred oil and gas consulting costs of $29,250 and management fees of
$22,750 to a company controlled by the President of the Company, of which
$13,773 was included in accounts payable and accrued liabilities as at
December 31, 2013. The amount owing is non-interest bearing, unsecured,
and due on demand. |
|
|
|
|
(c) |
During the year ended December 31, 2013, the Company
incurred wages of $20,879 to the Chief Financial Officer of the
Company. |
|
|
|
|
(d) |
During the year ended December 31, 2013, the Company
incurred management and consulting fees of $16,813 to the Corporate
Secretary, of which $7,250 was included in accounts payable and accrued
liabilities as at December 31, 2014. The amount owing is non-interest
bearing, unsecured, and due on demand. |
45
|
(e) |
During the year ended December 31, 2013, the Company
incurred oil and gas consulting costs of $71,765 to a company controlled
by the Vice President of Exploration of the Company. |
|
|
|
|
(f) |
During the year ended December 31, 2013, the Company
incurred accounting fees of $11,273 to a company controlled by the
Treasurer of the Company. |
|
|
|
|
(g) |
During the year ended December 31, 2013, the Company
granted 700,000 stock options with a fair value of $136,319 to officers
and directors of the Company. |
10. |
Commitments |
|
|
|
|
(a) |
On September 1, 2013, the Company entered into an
agreement with a consultant whereby the Company was to pay the consultant
Cdn$7,500 per month, increasing to Cdn$10,000 per month when the Company
raised at least Cdn$10,000,000 in financing, for a period of two years.
The Company had the right to terminate this agreement after the expiration
of one year if the Company had not secured a financing of at least
Cdn$10,000,000 during the first year of this agreement. On August 1, 2014,
the Company and the consultant entered into a termination agreement under
which this consulting agreement terminated as of December 31, 2014. In
lieu of any and all termination fees payable under the consulting
agreement, the Company granted 164,700 RSUs. Such RSUs vested on December
31, 2014, but were not issued. |
|
|
|
|
(b) |
On November 1, 2013 (as amended on August 1, 2014 and
March 27, 2015), the Company entered into an agreement with the President
of the Company and a company controlled by the President of the Company
with a term of two years effective September 1, 2013. The term will renew
on a month-to- month basis thereafter. Pursuant to the agreement as
amended, the Company is to pay $18,000 per month, with $5,000 of such
consulting fees being deferred and paid in RSUs to the President of the
Company through and including the month that a Phase I Capital Raise
transaction is completed by the Company not later than March 31, 2016, at
which time the deferral ends. The pricing for such RSUs will be determined
based on the average closing price of the Companys common shares for the
last ten days of the calendar quarter in which such RSUs accrued. Phase I
Capital Raise is defined as the following: |
|
(i) |
Raising in the aggregate $10,000,000 in one or a series
of capital raises, the calculation of which commences June 15, 2013;
or |
|
(ii) |
A farm out or other infusion of capital for the project
(under a financing or other arrangement) in an amount of $20,000,000 or
greater. |
If the Phase I Capital Raise is
completed on or before March 31, 2016, the President would also be issued
300,000 fully vested RSUs, which will be subject to a minimum two year hold
period upon completion of this financing. The Company will issue the President
100,000 fully vested RSUs upon each anniversary of this agreement dated upon
completion of the financing so long as the agreement remains in effect. If the
Company completes any additional cash financing of $10,000,000 or more in
addition to the first $10,000,000 of equity financing, the Company will issue
the President 250,000 fully vested RSUs upon the first subsequent capital raise
and 200,000 upon completion of a second subsequent capital raise.
11. |
Segmented Information |
|
|
|
The Companys operations are in the resource industry in
Canada and Bulgaria. Geographical information is as
follows: |
46
|
December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
|
|
Bulgaria |
|
|
Total |
|
|
Oil and gas properties |
$ |
|
|
$ |
2,195,157 |
|
$ |
2,196,157 |
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
|
|
Bulgaria |
|
|
Total |
|
|
Restricted cash |
$ |
2,300 |
|
$ |
|
|
$ |
2,300 |
|
|
Oil
and gas properties |
|
|
|
|
1,206,201 |
|
|
1,206,201 |
|
12. |
Income Taxes |
|
|
|
The Company has net operating losses carried forward of
$9,873,512 available to offset taxable income in future years which
expires beginning in fiscal 2014. |
|
|
|
The Company is subject to United States federal and state
income taxes at a rate of 34%. The reconciliation of the provision for
income taxes at the United States federal statutory rate compared to the
Companys income tax expense as reported is as
follows: |
|
|
|
2014
|
|
|
2013
|
|
|
Income tax at statutory rate |
$ |
(296,747 |
) |
$ |
(234,786 |
) |
|
Permanent differences and other |
|
810 |
|
|
88,366 |
|
|
Removal of losses from disposal of
subsidiary |
|
|
|
|
3,199,681 |
|
|
Valuation
allowance change |
|
295,937 |
|
|
(3,053,261 |
)
|
|
Income tax provision |
$ |
|
|
$ |
|
|
The significant components of deferred
income tax assets and liabilities as at December 31, 2014 and 2013 are as
follows:
|
|
|
2014
|
|
|
2013
|
|
|
Net operating losses carried forward |
$ |
3,356,994 |
|
$ |
1,309,952 |
|
|
Oil and gas properties |
|
125,566 |
|
|
125,566 |
|
|
Stock compensation expense |
|
44,401 |
|
|
- |
|
|
Property and
equipment |
|
377
|
|
|
377
|
|
|
Total deferred income tax assets |
|
3,527,338 |
|
|
1,435,895 |
|
|
Valuation
allowance |
|
(3,527,338 |
) |
|
(1,435,895 |
)
|
|
Net deferred income tax asset |
$ |
|
|
$ |
|
|
47
ITEM
9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE
In connection with the ongoing transition of the primary
offices and operations Company to Dallas, Texas, effective December 15, 2014,
the Board of Directors of the Company dismissed Saturna Group Chartered
Accountants LLP (Saturna) as the independent auditors for the Company and its
subsidiaries.
Saturnas report on the Companys consolidated financial
statements for the fiscal years ended December 31, 2013 and 2012 contained an
explanatory paragraph indicating that there was substantial doubt as to the
Companys ability to continue as a going concern. Other than such statement, no
report of Saturna on the consolidated financial statements of the Company for
either of the past two years and through December 15, 2014 contained an adverse
opinion or disclaimer of opinion, or was qualified or modified as to
uncertainty, audit scope or accounting principles.
During the Companys two most recent fiscal years and through
December 15, 2014: (i) there have been no disagreements with Saturna on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Saturna, would have caused it to make reference to the subject
matter of the disagreement in connection with its reports and (ii) Saturna did
not advise the Company of any of the events requiring reporting in the Form 8-K
filed on December 16, 2014.
Effective December 15, 2014, the Board of Directors ratified
and approved the Companys engagement of Whitley Penn LLP (WP) as independent
auditors for the Company and its subsidiaries.
During the years ended December 31, 2013 and 2012 and through
December 15, 2014, neither the Company nor anyone on its behalf consulted with
WP regarding (i) the application of accounting principles to a specific
completed or contemplated transaction, (ii) the type of audit opinion that might
be rendered on the Companys consolidated financial statements, or (iii) any
matter that was the subject of a disagreement or event identified in response to
Item 304(a)(1) of Regulation S-K (there being none).
ITEM
9A. CONTROLS AND
PROCEDURES Evaluation of Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of our
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) as of December 31, 2014 (the Evaluation Date). This evaluation was carried out under the
supervision and with the participation of our Chief Executive Officer (CEO)
and Chief Financial Officer (CFO). Based upon that evaluation, we concluded
that our disclosure controls and procedures were effective.
Therefore, we believe that our consolidated financial
statements contained in our Form 10-K for the year ended December 31, 2014
fairly present our financial condition, results of operations and cash flows in
all material respects.
Changes in Internal Control over Financial Reporting
There were changes in our internal control over financial
reporting that occurred during our last fiscal year that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
48
This Annual Report does not include an attestation report of
the Companys registered public accounting firm regarding internal control over
financial reporting. Our managements report was not subject to attestation by
our registered public accounting firm pursuant to temporary rules of the
Commission that permit us to provide only the managements report in this Annual
Report.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial
reporting, other than those mentioned above, that occurred during the last
quarter of our fiscal year ended December 31, 2014, that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
Management's Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectivemess to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making this assessment, management used the criteria set forth in 1992 by the Committee of Sponsoring Organizations of the Treadway Commission in "Internal Control - Intergrated Framework". Based on this assessment, our management concluded that, as of December 31, 2014, our internal control over financial reporting was effective based on those criteria.
ITEM
9B. OTHER
INFORMATION
Not applicable.
PART III
ITEM
10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors and Executive Officers
The following table and information that follows sets forth the
names and positions of our directors and executive officers as at December 31,
2014:
Name |
Current Office with Company |
Since |
Scott C. Larsen |
President, Chief
Executive Officer and Director |
October 29, 2013 (Director); November 1, 2013 (President
and CEO) |
|
|
|
Ijaz Kahn |
Director |
October 29, 2013 |
|
|
|
Art Halleran |
Director |
October 4, 2011 |
|
|
|
David M. Thompson |
Director |
October 29, 2013 |
|
|
|
Charles Michel |
Chief Financial
Officer |
September 15, 2014
|
A description of the business background of our directors and
executive officers is set out in Item 1 under Employees and Directors.
Term of Office
All of our directors hold office until the next annual
shareholders meeting or until their successors are elected and qualified. Our
officers are appointed by our Board of Directors and hold office until their
earlier death, retirement, resignation or removal.
Significant Employees
There are no employees; all officers of the Company are acting
on a consultant basis.
49
Family Relationships
There are currently no family relationships between any of the
members of our Board of Directors or our executive officers.
Committees of the Board of Directors
Our Company does not currently have any committees of our Board
of Directors.
Involvement in Certain Legal Proceedings
There are currently no legal proceedings to which any of our
directors or executive officers is a party adverse to us or in which any of our
directors or executive officers has a material interest adverse to us.
Compliance with Section 16 of the Securities Exchange
Act
Section 16(a) of the Exchange Act requires the executive
officers and directors, and persons who beneficially own more than ten percent
(10%) of our equity securities (10% shareholders), to file reports of
ownership and changes in ownership with the Commission. Executive officers,
directors and 10% shareholders are required by SEC regulation to furnish us with
copies of all Section 16(a) forms they file. We have received copies of such
forms from our executive officers and directors, and from the following 10%
shareholders: Parvez Tyab Family Trust, Aura Oil Holdings Ltd., and Century
House Holdings Ltd. During the fiscal year ended December 31, 2014, these
filings were made on a timely basis by our executive officers, directors and 10%
shareholders, except as follows: Taisiia Popova (2 late reports), Scott Larsen
(2 late reports), Arthur Halleran (2 late reports, 3 late transactions), Ijaz
Khan (1 late report), David Thompson (2 late reports), Century House Holdings
Ltd. (7 late reports, 22 late transactions), Aura Oil Holdings Ltd. (2 late
reports, 7 late transactions), and Parvez Tyab Family Trust (2 late reports).
Two other shareholders who were 10% shareholders during 2014 according to the
Companys records (but are not 10% shareholders as of December 31, 2014) have
not filed a Form 3 reporting their ownership nor have they filed any other
Section 16(a) forms: Cardaro Holdings Ltd. and World Upstream Energy DMMC.
ITEM
11. EXECUTIVE
COMPENSATION
Summary Compensation Table
Particulars of compensation awarded to, earned by or paid
during the last two fiscal years to:
|
(a) |
the person(s) serving as our Companys principal
executive officer during the year ended December 31, 2014; |
|
|
|
|
(b) |
each of our companys two most highly compensated
executive officers, other than the principal executive officer, who were
serving as executive officers at the end of the year ended December 31,
2014, and whose total compensation exceeds $100,000 per; and |
|
|
|
|
(c) |
up to two additional individuals for whom disclosure
would have been provided under (b) but for the fact that the individual
was not serving as an executive officer of our Company at the end of the
year ended December 31, 2014; |
(individually a Named Executive Officer and collectively the
Named Executive Officers) are set out in the summary compensation table
below.
50
Name and
Principal Position
|
Year
|
Salary and
management
fees ($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option Awards
($)
(1)
|
Non-Equity
Incentive Plan Compen-
sation ($)
|
Non-
qualified
Deferred Compen- sation
Earnings ($) |
All Other
Compensation
($)
|
Total
($)
|
Scott C. Larsen President &
CEO(2) |
2014 2013
|
$156,000 $37,000
|
- $15,000
|
$45,529 $12,000
|
- $80,873
|
- -
|
- -
|
- -
|
$201,529 $144,873
|
Taisiia Popova CFO (2)
|
2014 2013
|
$31,875 $20,879
|
$2,000 -
|
$4,200 -
|
- -
|
- -
|
- -
|
- -
|
$38,075 $20,879
|
Charles Michel CFO (2) |
2014
|
$38,300
|
-
|
-
|
-
|
-
|
-
|
-
|
$38,300
|
Notes
|
(1) |
This column represents the grant date fair value of stock
options (or other stock-based awards) granted. |
|
(2) |
Ms. Popova was the CEO of the Company in 2013 until Mr.
Larsens appointment as CEO on November 1, 2013. Ms. Popova was the CFO of
the Company in 2014 until Mr. Michels appointment as CFO on September 15,
2014. |
Outstanding Equity Awards as of December 31, 2014
The following table summarizes the outstanding equity awards as
of December 31, 2014 for each of our Named Executive Officers:
Option Awards |
Stock Awards |
Name
|
Number
of Securities Underlying Unexercised
Options (#) Exercisable |
Number
of Securities Underlying Unexercised
Options (#) Unexercisable |
Equity
Incentive Plan Awards: Number
of Securities Underlying Unexercised
Unearned Options (#) |
Option
Exercise Price ($) |
Option
Expiration Date |
Number
of Shares or Units of Stock
That Have Not Vested
(#) |
Market Value
of Shares or Units
of Stock That Have
Not Vested ($) |
Equity Incentive
Plan Awards: Number of
Unearned Shares, Units or
Other Rights That Have Not
Vested (#) |
Equity
Incentive
Plan Awards: Market or Payout
Value of Unearned Shares,
Units or Other Rights That
Have Not Vested ($) |
|
|
|
|
|
|
-
|
-
|
-
|
-
|
Scott C. Larsen*
|
600,000 400,000
|
-
|
-
|
0.23 0.10
|
4-30-2018 10-30-2016
|
- - - |
- - - |
- - 203,571 |
- - 45,529 |
Taisiia Popova |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
51
*Held through Larsen Energy Consulting Inc.
Compensation of Directors
Option Awards |
Stock Awards |
Name |
Number
of Securities Underlying Unexercised
Options (#) Exercisable |
Number
of Securities Underlying Unexercised
Options (#) Unexercisable |
Equity
Incentive Plan Awards: Number
of Securities Underlying Unexercised
Unearned Options (#) |
Option
Exercise Price ($) |
Option
Expiration Date |
Number
of Shares or Units of
Stock That Have Not Vested
(#) |
Market Value
of Shares or Units
of Stock That Have
Not Vested ($) |
Equity Incentive
Plan Awards: Number of
Unearned Shares, Units or
Other Rights That Have Not
Vested (#) |
Equity
Incentive
Plan Awards: Market or Payout
Value of Unearned Shares,
Units or Other Rights That
Have Not Vested ($) |
Ijaz Kahn
|
100,000 50,000 |
- - |
- - |
0.23 0.235 |
10-31-2016 1-1-2017 |
- - |
- - |
- - |
- - |
Arthur Halleran
|
300,000 50,000 50,000 |
- - - |
- - - |
0.10 0.23 0.235 |
11-20-2016 10-31-2016 1-1-2017 |
- - - |
- - - |
- - - |
- - - |
David Thompson |
100,000 50,000 |
- - |
- - |
0.23 0.235 |
10-31-2016 1-1-2017 |
- - |
- - |
- - |
- - |
Employment Contracts and Termination of Employment and
Change-In-Control Arrangements
On November 1, 2013 (as amended on August 1, 2014 and March 27,
2015), the Company entered into an agreement with the President of the Company
and a company controlled by the President of the Company with a term of two
years effective September 1, 2013. The term will renew on a month-to-month basis
thereafter. Pursuant to the agreement as amended, the Company is to pay $18,000
per month, with $5,000 of such consulting fees being deferred and paid in RSUs
to the President of the Company through and including the month that a Phase I
Capital Raise transaction is completed by the Company not later than March 31,
2016, at which time the deferral ends. The pricing for such RSUs will be
determined based on the average closing price of the Companys common shares for
the last ten days of the calendar quarter in which such RSUs accrued. Phase I
Capital Raise is defined as the following:
|
(iii) |
Raising in the aggregate $10,000,000 in one or a series
of capital raises, the calculation of which commences June 15, 2013;
or |
|
(iv) |
A farm out or other infusion of capital for the project
(under a financing or other arrangement) in an amount of $20,000,000 or
greater. |
There are no other employment contracts or related arrangements
with our executive officers.
ITEM
12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER
MATTERS
The following table sets forth information as of December 31,
2014 regarding the beneficial ownership of our common stock by:
- each person who is known by us to beneficially own more than 5% of our
shares of common stock known to us; and
52
- each Named Executive Officer, each director and all of our directors and
Named Executive Officers as a group.
The number of shares beneficially owned and the percentage of
shares beneficially owned are based on 45,624,427 shares of common stock
outstanding as of December 31, 2014.
For the purposes of the information provided below, shares that
may be issued upon the exercise or conversion of options, warrants and other
rights to acquire shares of our common stock that are exercisable or convertible
within 60 days following December 31, 2014, are deemed to be outstanding and
beneficially owned by the holder for the purpose of computing the number of
shares and percentage ownership of that holder, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of any other
person, and (ii) Charles Michel, the CFO of the Company, does not own any
Company common stock and therefore is not listed below.
|
As of December 31, 2014 |
Name and Address of Beneficial Owner |
Shares |
Percent(1) |
|
|
|
Parvez Tyab Family Trust
1034-55 Stewart St. Toronto, Ontario, Canada |
9,234,605 (2) |
19.3 |
|
|
|
Aura Oil Holdings Ltd.
2nd Floor 25 Church Street Hamilton, Bermuda |
6,963,100 (2) |
15.2 |
|
|
|
Cardaro Holdings Ltd. 753
Cardero Street, Vancouver, BC, Canada |
4,000,000 (2) |
8.4 |
|
|
|
Century House Holdings
Limited 2nd Floor 25 Church Street Hamilton, Bermuda |
11,467,533 (2) |
23.3 |
|
|
|
World Upstream Energy DMMC
PO Box 76326, Dubai, UAE |
4,000,000 (2) |
8.4 |
|
|
|
Scott C. Larsen 2200 Ross
Ave., Suite 4500E, Dallas, TX 75201 |
2,200,000 (2)(3) |
4.7 |
|
|
|
Arthur Halleran 2200 Ross
Ave., Suite 4500E, Dallas, TX 75201 |
400,000 (2) |
0.9 |
|
|
|
Ijaz Kahn 2200 Ross Ave.,
Suite 4500E, Dallas, TX 75201 |
650,000 (2) |
1.4 |
|
|
|
David Thompson 2200 Ross
Ave., Suite 4500E, Dallas, TX 75201 |
750,000 (2) |
1.6 |
|
|
|
Named Executive Officers and
Directors as a Group |
4,000,000 (2) (3) |
8.3 |
Notes
(1) |
Under Rule 13d-3, a beneficial owner of a security
includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship, or otherwise has or shares: (i)
voting power, which includes the power to vote, or to direct the voting of
shares; and (ii) investment power, which includes the power to dispose or
direct the disposition of shares. Certain shares may be deemed to be
beneficially owned by more than one person (if, for example, persons share
the power to vote or the power to dispose of the shares). In addition,
shares are deemed to be beneficially owned by a person if the person has
the right to acquire the shares (for example, upon exercise of an option)
within 60 days of the date as of which the information is provided. In
computing the percentage ownership of any person, the amount of shares
outstanding is deemed to include the amount of shares beneficially owned
by such person (and only such person) by reason of these acquisition
rights. As a result, the percentage of outstanding shares of any person as
shown in this table does not necessarily reflect the persons actual
ownership or voting power with respect to the number of common shares
actually outstanding on December 31,2014. |
|
|
(2) |
Includes warrants, restricted stock units and/or options
to acquire common stock exercisable within 60 days, as follows: Parvez
Tyab Family Trust 2,200,000 warrants; Aura Oil Holdings Ltd. 300,000
warrants; Cardaro Holdings Ltd 2,000,000
warrants; Century House Holdings Limited 3,500,000 warrants; World
Upstream Energy DMMC 2,000,000 warrants; Scott C. Larsen 500,000 warrants
and 1,000,000 options; Arthur Halleran 400,000 options; Ijaz Khan - 250,000
warrants and 150,000 options; David Thompson 250,000 warrants and 150,000
options. Each warrant is exercisable into one share of the Companys common
stock for a period of 36 months from August 30, 2013 at a price of $0.20 per
share. |
|
|
(3) |
Includes 600,000 options held by Larsen Energy Consulting
Inc. |
53
ITEM
13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Except for the transactions described herein, since the
beginning of our last two fiscal years, none of our directors, executive
officers or principal shareholders, nor any associate or affiliate of the
foregoing, has any material interest, direct or indirect, in any transaction, or
in any proposed transaction, in which our Company was or is to be a participant
and in which the amount involved exceeds the lesser of $120,000 or one percent
(1%) of the average of our total assets at year-end for the last two completed
fiscal years.
Related party transactions are in the normal course of
operations, occurring on terms and conditions that are similar to those of
transactions with unrelated parties.
Compensatory Arrangements
Compensation to all
officers of the Company is paid through consulting agreements described under
Executive Compensation. We have no other transactions, directly or indirectly,
with our promoters, directors, executive officers, which have materially
affected or will materially affect us.
Director Independence
Directors Halleran, Thompson
and Khan are considered independent directors under SEC rules and as defined by
Rule 5605(a)(2) of the NASDAQ Marketplace Rules. Director Larsen is not
considered an independent director under those rules.
ITEM
14. PRINCIPAL
ACCOUNTING FEES AND SERVICES
In connection with the ongoing transition of the primary
offices and operations of Company to Dallas, Texas, effective December 15, 2014,
the Board of Directors of the Company dismissed Saturna Group Chartered
Accountants LLP (Saturna) as the independent auditors for the Company and its
subsidiaries.
Saturna performed the services listed below and was paid the
fees listed below for the fiscal years ended December 31, 2014 and December 31,
2013:
Audit Fees
2014 |
2013
|
Usd$35,340 |
Cdn$33,900
|
Audit fees consist of fees billed for professional services
rendered for the audits of our financial statements, reviews of interim
financial statements included in quarterly reports, services performed in
connection with filings with the SEC and related comfort letters and other
services that are normally provided by Saturna in connection with statutory and
regulatory filings or engagements.
Audit Related Fees
54
Tax Fees
Tax Fees consist of fees billed for professional services for
tax compliance, tax advice and tax planning. These services include assistance
regarding federal, state and local tax compliance and consultation in connection
with various transactions and acquisitions.
All Other Fees
Audit Committee Pre-Approval of Audit and Permissible
Non-Audit Services of Independent Auditors
Our entire Board of Directors acts as our audit committee, and
has assumed responsibility for the pre-approval of audit and permitted non-audit
services to be performed by our Companys independent auditor. The audit
committee will, on an annual basis, consider and, if appropriate, approve the
provision of audit and non-audit services by the Companys independent auditor.
Thereafter, the audit committee will, as necessary, consider and, if
appropriate, approve the provision of additional audit and non-audit services by
the Companys independent auditor that are not encompassed by the audit
committees annual pre-approval and are not prohibited by law.
55
PART IV
ITEM
15. EXHIBITS
Articles of Incorporation and
Bylaws |
3.1 |
Articles of Incorporation(1) |
3.2 |
Amended and Restated Bylaws(2) |
3.3 |
Certificate of Change Effective August 31,
2009(3) |
3.4 |
Certificate of Change Effective March 24,
2010(4) |
|
|
Material Contracts |
10.01 |
Larsen Energy Consulting Inc. Agreement dated May 1, 2013
(5) |
10.02 |
Overgas Data and Consulting Agreement dated July 11, 2013
(6) |
10.03 |
Larsen Energy Consulting Inc. Agreement dated November 1,
2013 (7) |
10.04 |
De-registration of 2007 stock option plan dated December
27, 2013 (8) |
10.05 |
2011 Stock option plan dated November 21, 2011
(9) |
10.06 |
2013 Long-Term Equity Incentive Plan effective October
29, 2013 (10) |
10.07 |
First Amendment to the Larsen Energy Consulting Inc.
Agreement dated August 1, 2014 (11) |
|
|
Subsidiaries of the Small Business Issuer |
21.1 |
Subsidiaries of Small Business Issuer:
|
|
|
Certifications |
|
31.1 |
Certification of Chief Financial Officer pursuant to Rule
13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange
Act of 1934, as amended |
31.2 |
Certification of Chief Executive Officer pursuant to Rule
13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange
Act of 1934, as amended |
32.1 |
Certification of Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 |
Notes
(1) |
Incorporated by reference from our Current Report on Form
8-K/A, filed with the SEC on August 8, 2007. |
(2) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on January 17, 2014. |
(3) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on September 3, 2009. |
(4) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on March 29, 2010. |
(5) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on July 18, 2013. |
(6) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on July 18, 2013. |
(7) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on November 7, 2013. |
(8) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on January 17, 2014. |
(9) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on November 25, 2011. |
(10) |
Incorporated by reference from our Schedule 14A filed on
September 27, 2013. |
(11) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on August 6, 2014. |
56
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PARK PLACE ENERGY CORP.
By: |
/s/ Scott C. Larsen |
|
|
Scott C. Larsen |
|
|
President, Chief Executive
Officer and a Director |
|
|
Date: March 31, 2015 |
|
In accordance with the Securities Exchange Act, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
PARK PLACE ENERGY CORP.
By: |
/s/ Scott C. Larsen |
|
|
Scott C. Larsen |
|
|
President, Chief Executive
Officer and a Director |
|
|
Date: March 31, 2015 |
|
|
|
|
|
|
|
By: |
/s/ Ijaz Kahn |
|
|
Ijaz Kahn |
|
|
Director |
|
|
Date: March 31, 2015 |
|
|
|
|
|
|
|
By: |
/s/ David Thompson |
|
|
David Thompson |
|
|
Director |
|
|
Date: March 31, 2015 |
|
|
|
|
|
|
|
By: |
/s/ Arthur Halleran |
|
|
Arthur Halleran |
|
|
Director |
|
|
Date: March 31, 2015 |
|
|
|
|
|
|
|
By: |
/s/ Charles Michel |
|
|
Charles Michel |
|
|
Chief Financial Officer |
|
|
Date: March 31, 2015 |
|
57
Exhibit 21.1
Park Place Energy Corp.
Subsidiaries of Small Business Issuer
December 31, 2014
Name |
Jurisdiction |
|
|
BG Explorations EOOD |
Bulgaria |
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT
OF 2002
I, Scott C. Larsen, certify that:
1. |
I have reviewed this Annual Report on Form 10-K for the
year ended December 31, 2014 of Park Place Energy Corp.; |
|
|
|
2. |
Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report; |
|
|
|
3. |
Based on my knowledge, the financial statements, and
other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report; |
|
|
|
4. |
The registrants other certifying officer(s) and I have
been responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
|
|
a. |
Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
|
|
|
|
b. |
Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles; |
|
|
|
|
c. |
Evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and |
|
|
|
|
d. |
Disclosed in this report any change in the registrants
internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth quarter
in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control
over financial reporting; and |
5. |
The registrants other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrants auditors and the audit committee
of the registrants Board of Directors (or persons performing the
equivalent functions): |
|
|
|
|
a. |
All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting,
which are reasonably likely to adversely affect the registrants ability
to record, process, summarize and report financial information;
and |
|
|
|
|
b. |
Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial
reporting. |
Date: March 31, 2015
By: /s/ Scott C. Larsen
Scott C. Larsen, President, Chief Executive Officer and a Director
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT
OF 2002
I, Charles Michel, certify that:
1. |
I have reviewed this report on Form 10-K for the year
ended December 31, 2014 of Park Place Energy Corp.; |
|
|
|
2. |
Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report; |
|
|
|
3. |
Based on my knowledge, the financial statements, and
other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report; |
|
|
|
4. |
The registrants other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
|
|
a. |
Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
|
|
|
|
b. |
Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles; |
|
|
|
|
c. |
Evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and |
|
|
|
|
d. |
Disclosed in this report any change in the registrants
internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrants internal
control over financial reporting; and |
5. |
The registrants other certifying officer(s) and I have
disclosed, based on our most recent evaluation of the internal control
over financial reporting, to the registrants auditors and the audit
committee of the registrants Board of Directors (or persons performing
the equivalent functions): |
|
|
|
|
(a) |
all significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrants ability to
record, process, summarize and report financial information; and |
|
|
|
|
(b) |
any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial
reporting. |
Date: March 31, 2015
/s/ Charles Michel
By: Charles Michel
Title:
Chief Financial Officer
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL
OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Each of the undersigned, Scott C. Larsen, the President and
Chief Executive Officer of Park Place Energy Corp. (the Company), and Chas
Michel, the Chief Financial Officer of the Company, hereby certifies, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to his knowledge, the Annual Report on Form
10-K for the year ended December 31, 2014, fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended,
and that the information contained in the Annual Report on Form 10-K, as
amended, fairly presents in all material respects the financial condition and
results of operations of the Company.
Date: March 31, 2015
By: /s/ Scott C. Larsen
Scott C. Larsen
President, Chief
Executive Officer and a Director
By: /s/ Charles Michel
Charles Michel
Chief Financial Officer
A signed original of this written statement required by Section
906, or other document authenticating, acknowledging, or otherwise adopting the
signatures that appear in typed form within the electronic version of this
written statement required by Section 906, has been provided to the Company and
will be retained by the Company and furnished to the Securities and Exchange
Commission or its staff upon request.
__________